Tesla parks mass-market car

Tesla’s stock has slumped on reports the group has jettisoned a “long-promised plan to offer an inexpensive electric car” to “drive its expansion in the mass market”, says The Times.

The move, which CEO Elon Musk has denied, represents a “dramatic change of heart”, given that he has described Tesla’s primary mission as producing “affordable electric cars for the masses”.

His first “master plan” in 2006 involved Tesla using the profits from luxury models to finance a “lowcost family car”. More recently, expectations for a $25,000 vehicle have underpinned Tesla’s dreams of selling 20 million vehicles by 2030, and Wall Street analysts’ sales forecasts of 4.2 million cars in 2028, up from 1.8 million last year.

Tesla is also having to deal with cheaper Chinese brands, declining demand in China and the US, and the “polarising personality of Elon Musk”. All these have led to a 33% drop in Tesla’s share price since the start of the year, making it the S&P 500’s second-worst performer. The slowdown in demand for electric cars is particularly worrying as Tesla “does not have petrol models to fall back on, nor does it make hybrids”. Still, Tesla has $29bn in cash to help it navigate the downturn.

Indeed, Tesla’s “bumpy ride” is nothing compared with the problems of smaller upstarts, says The Economist. The combined market value of “six prominent Tesla wannabes” (Rivian, Lucid Motors, VinFast, Xpeng, NIO and Li Auto) has plunged from a “stonking $400bn” to just $65bn. Others are “either “teetering on the brink of bankruptcy” or have already gone under.

While the move to electric vehicles was supposed to “bring down barriers to entry”, making money “still requires producing perhaps 500,000 vehicles a year”, something that most of Tesla’s EV competitors have struggled to do. Still, if Tesla thinks the EV shakeout will give it an opportunity to “catch a breath”, the coming “wave of carmaking disruption” from Chinese tech companies should give it cause to “think again”.