Tesla Chief Elon Musk has already irked some of its investors with his omission of key information about the long-promised $25,000 electric car, also called “Model 2,” amid increasing reports indicating the project’s cancellation.
What’s the Issue?
According to the international news agency Reuters, Tesla CEO Elon Musk left its investors hanging when he posted a “cryptic” remark on his social media platform X.
The American billionaire basically called the news outlet a “liar” following its report on April 5, which talked about Tesla’s decision to ditch the Model 2 project. Notably, the report cited four unnamed sources with knowledge of the company’s strategy and internal messages depicting the project’s cancellation.
“Reuters is lying (again)”
Tesla CEO Elon Musk
Despite his denial, the post did not point out any inaccuracies about the report. In effect, Tesla investors started to feel agitated about the situation after two weeks since the report.
Wall Street Loses Patience
Many Tesla investors now demand straightforward answers from CEO Elon Musk about the Model 2 development. They also seek to know more about the American electric automaker’s plans for controlling a sales slide amid waning global demand and intensifying pressure from lower-cost China-made models.
Moreover, they also want clarity about Tesla’s alleged plan to focus on the Robotaxi, which will ride on the same platform as the $25,000 EV.
Tesla’s recent layoff of over 10% of its entire workforce and the departure of several top executives substantially amplified the restlessness of its shareholders.
“The street wants and NEEDS answers” on the upcoming earnings call on April 23, Reuters reported, citing the notes of Wedbush Securities analysts. The analysts cited a “horror show” featuring a series of bad news from the electric vehicle giant.
In that sense, they now demand Tesla provide a precise “strategic vision … with Model 2 a key component.”
Wedbush Senior Equity Analyst Dan Ives even described CEO Musk’s silence on the Tesla Model 2 development as “gut-wrenching” to investors as “it’s so instrumental to the growth story.”
Gerber Kawasaki Wealth & Investment Management President and CEO Ross Gerber also expressed disappointment if Tesla did not pursue the affordable car.
“There’s no point in even investing in Tesla if they don’t come out with this car.”
Ross Gerber, Tesla Investor
Some Investors remain optimistic
Despite the apprehensions of several investors, others remain optimistic about Tesla’s recent moves.
Some Tesla investors have apparently supported the idea of prioritizing the Robotaxi development rather than the $25,000 Model 2, including Deepwater Asset Management Managing Partner Gene Munster. He does not think the Tesla boss denied Reuters’ report as many investors assumed.
“He didn’t mention anything about Model 2. He just said Reuters is a liar. But he calls everybody liars.”
Gene Munster, Deepwater Asset Management Managing Partner
Carson Wealth Management Group Portfolio Manager Jake Bleicher also thinks that the Robotaxi can substantially aid Tesla in competing with China-made models.
“If Aug. 8 rolls around and Tesla says, ‘We’re going live with robotaxi in five or six cities,’ I think that’s enough to get the stock moving.”
Jake Bleicher, Carson Wealth Management Group Portfolio Manager
However, he warned Tesla to offer concrete plans in the unveiling event as investors “will be scared” if the advancement is less palpable.
“Especially with the profit margin on (Tesla) vehicles dropping dramatically over the last two years,. It’s become less about the vehicles and more about the promises that Musk makes.”
Jake Bleicher, Carson Wealth Management Group Portfolio Manager
CEO Musk’s two initial X posts countered stock losses, which declined 6% following Reuter’s April 5 report.
Tesla remains the most valuable automaker in the world in terms of market capitalization, which currently stands at approximately $500 billion. This figure is significantly higher than Japanese legacy automaker Toyora, which is currently the largest auto brand by volume.
