Tesla Investors Anticipate Details on Lower-Priced Model Amid Growth Targets

Tesla investors eagerly await insights into the automaker's upcoming lower-priced model as the company prepares to release its quarterly earnings report on Wednesday. Expectations are high that the more affordable car will contribute to Tesla's ambitious goal of increasing deliveries by up to 30% this year.

Despite the industry's challenges, Tesla has witnessed a remarkable surge in its valuation. Since President Donald Trump's election in November 2016, the company's market capitalization has soared by over 60% to a staggering $1.3 trillion. Investors anticipate that the new administration will ease regulations on self-driving systems, a technology Tesla actively develops.

Facing stiff competition in China, Tesla experienced a decline in annual deliveries in 2024. However, analysts project a rebound in sales volume this year, driven by lower borrowing costs. Nevertheless, Tesla faces pressure to enhance its aging vehicle lineup in the U.S. and is relying on its Cybertruck electric pickup truck to stimulate sales.

Additionally, Tesla recently unveiled an updated version of its popular Model Y crossover SUV, hoping to attract new customers. "Tesla's growth prospects from its current lineup appear limited," notes Barclays analyst Dan Levy. "Therefore, the new low-cost model remains crucial to their growth strategy, albeit possibly not to the extent of their previous 20-30% annual target."

In 2023, Tesla announced plans to introduce cheaper vehicles based on existing platforms. This shift came after ambitious aspirations to produce a completely new model with a projected cost of $25,000.

Some investors harbor concerns that the new model may not qualify for federal subsidies under the Inflation Reduction Act. However, Reuters previously reported that these subsidies may be eliminated under the Trump administration, a move supported by Tesla CEO Elon Musk.

"We don't know yet whether the new model will qualify for the $7,500 U.S. rebate, which could impact consumer costs," says David Wagner, portfolio manager at Tesla investor Aptus Capital Advisors. "Additionally, we need more information about its differentiation from existing Model Y offerings and its potential impact on those sales."

Despite recent stock gains, Tesla continues to trade at a premium, reflecting its status as a high-growth tech company with significant potential in AI and robotics. Its price-to-earnings ratio eclipses that of industry giants like Microsoft, Alphabet, and Nvidia.

Analysts estimate Tesla will sell approximately 2.1 million cars this year, marking a growth of 16%. This upward trajectory follows a slight decline in deliveries last year, attributed to an aging model lineup and competition from legacy automakers in China and Europe.

Tesla's advanced driver assistance software, Full Self-Driving (FSD), has significantly contributed to its profitability, leading to higher-than-anticipated profit margins in the third quarter of 2023. Analysts expect FSD to continue boosting margins, supported by lower production costs.

Tesla is also actively pursuing artificial intelligence-based products, recognizing the challenges posed by low-cost competitors in China. The company has showcased its Cybercab robotaxi, scheduled for production in 2025.