Tesla Stock Plummets 6% Amid Slowing EV Market

Tesla has witnessed a significant stock decline of 3.6%, culminating in a turbulent week where the company’s shares plummeted nearly 6% due to diminishing demand for electric vehicles (EVs) impacting sales, and speculation regarding future product strategies.

Reports emerged on Friday, notably from Reuters, suggesting that Tesla had scrapped plans to produce a long-awaited, sub-$30,000 EV, commonly referred to as the Model 2. Instead, sources familiar with the matter indicated a pivot towards prioritising the development of a self-driving robotaxi. Despite Tesla CEO Elon Musk’s dismissal of these claims on social media, the company announced plans to unveil the robotaxi on August 8th.

This announcement came amidst a challenging period for the EV giant, following disappointing first-quarter delivery numbers. Tesla’s global deliveries for Q1 totaled 386,810 vehicles, significantly below analysts’ estimates of 449,080, marking a nearly 10% drop from the previous year’s figures. This decline, coupled with a more than 20% decrease from the previous quarter, reflects the company’s first year-over-year decline in first-quarter deliveries since 2020.

Moreover, concerns regarding inventory levels and potential demand issues were highlighted by analysts, including Emmanuel Rosner from Deutsche Bank, who noted a significant discrepancy between deliveries and production.

Adding to the turmoil, just prior to the disappointing delivery report, Tesla raised prices on its popular Model Y SUV across various markets. However, amidst intensifying competition, particularly in China, Tesla swiftly reversed its pricing strategy, offering incentives such as zero-interest loans and free trials of its self-driving software to stimulate demand.

Despite these efforts, analysts like Garrett Nelson from CFRA express scepticism, suggesting that Tesla’s strategic shifts may challenge investor expectations, particularly regarding future growth catalysts.

As Tesla navigates a complex landscape of evolving market dynamics and fierce competition, uncertainties regarding demand, pricing strategies, and regional challenges loom large, prompting cautious sentiments among analysts and investors alike.