Tesla stock surged on Tuesday after CEO Elon Musk announced plans for “more affordable” electric vehicle models, despite a recent decline in the company’s revenue and profit margins.
The electric vehicle giant reported a nine percent drop in revenue during the first quarter, falling to $21.3 billion from $23.33 billion in the same period last year, and from $25.17 billion in the fourth quarter. Before the stocks rebounded by about 11 percent after hours on Tuesday, Tesla’s shares had already plummeted by more than 40 percent this year, reflecting the company’s rocky financial outlook.
Tesla’s net income also took a hit, dropping by over 50 percent to $1.1 billion, with gross profits down by nearly 20 percent, partly due to price cuts earlier this year. However, the talk of new, affordable vehicle models sent the company’s shares soaring on Tuesday, offering a much-needed boost amid mounting competition and dwindling sales.
Musk announced that Tesla is planning to introduce “new vehicles, including more affordable models,” with production expected to begin in early 2025 or possibly late this year. He did not reveal specific details about the new models or their exact release dates, leaving some room for speculation.
Industry analysts believe these more affordable models could be simplified versions of existing vehicles like the Model 3, which, after recent price cuts, costs around $39,000 in the United States. Despite these hints, Musk remained tight-lipped about the new vehicle’s specifics, stating only that it would incorporate elements of a next-generation platform alongside the current production system.
Musk also mentioned a simplified manufacturing process called the “unboxed” approach, which could further reduce production costs. “This is not contingent on a new factory or massive new production lines,” Musk said, suggesting that the new models would be manufactured more efficiently on existing production lines.
The CEO’s vague responses left investors with mixed feelings. When asked directly about Tesla’s commitment to cheaper electric vehicles, Musk gave a somewhat ambiguous answer, saying, “If you have a great product at a great price, sales will be excellent.” Despite this lack of specificity, Musk expressed optimism about the company’s outlook, noting that “we think Q2 will be a lot better.”
In addition to announcing plans for new models, Musk dismissed a Reuters report claiming Tesla had scrapped its initial plans for a Model 2, a previously expected key to Tesla’s growth. Musk responded on X (formerly Twitter), calling the story a lie without elaborating on what inaccuracies he was referring to.
Overall, Tesla’s announcement of more affordable electric vehicle models provided a lift to the company’s shares, offering hope for better days ahead as the EV market becomes increasingly competitive.
