Tesla must launch cheap EVs but Musk’s talking of robotaxis
Autonomous cars are still a dream but Tesla’s sales slump is real
The great thing about X, the rebranded Twitter owned by Elon Musk, is its frictionless capacity for escalation. Let’s back up to several hours before that post on what was a bizarre Friday even by the standards of Tesla and its chief executive officer. Late that morning, a Reuters story, citing several unnamed sources and internal messages, reported that Tesla has scrapped plans for a cheaper electric vehicle (EV) dubbed ‘Model 2.’ Tesla’s stock dropped by more than 5% in short order. Soon after, Musk replied to a tweet noting the story, accusing the news agency of “lying (again).” The stock made back some lost ground, but still ended the day down 3.6%. Less than an hour after that, Musk tweeted again with an announcement. Tesla’s stock jumped in after-hours trading.
I cannot speak to the accuracy of the Reuters piece; Musk’s accusation of lying came with no specifics. His reaction as a whole is interesting, though.
Tesla walking away from the low-priced EV model would be a bombshell; hence the immediate drop in the stock. Only on Tesla’s last earnings call, in late January, Musk had provided a tentative date for first production in the second half of 2025, saying of the low-cost project that “this is really going to be profound, not just in [the] design of the vehicle itself, but in the design of the manufacturing system.”
Moreover, gathering evidence of a slowdown in Tesla’s sales, culminating in shockingly weak figures for the first quarter released last week, points to the need for a cheaper model that could expand the company’s market meaningfully. Any other company faced with a media report calling into question one of its biggest strategic initiatives might be tempted to issue a detailed rebuttal rather than just a one-line tweet from the boss, but Tesla is different.
More intriguing was Musk’s upping the ante with that later tweet promising a robotaxi reveal in 125 days. For one thing, the Reuters story reported that a big reason for ditching the low-cost EV was to focus resources on developing a Tesla robotaxi. I like to think that if I wanted to demonstrate that a story claiming I had ditched my plans for a cheap EV in order to build a robotaxi was incorrect, I would avoid that same day suddenly announcing the imminent unveiling of a robotaxi.
There is much context to consider. Friday’s drama closed out a bad week for Tesla. The big miss on sales, below even the lowest analyst forecast tracked by
Bloomberg, tees up not just a poor set of first-quarter results but also, potentially, a year where sales either barely grow or actually drop—a big problem for a growth stock. Musk, in his own way, forewarned of the miss by previously announcing a big push on upselling buyers to Tesla’s full self-driving (FSD) system; signalling a need to support sagging margins, explain slower sales and, perhaps above all, keep investors focused on the company’s touted artificial intelligence chops.
The mooted robotaxi unveiling is in keeping with this. Musk has been claiming that a Tesla robotaxi—meaning a vehicle that can safely drive itself while the user snoozes or tweets or whatever—is around the corner since at least 2016, including a rousing analyst day dedicated to the theme in 2019.
It is 2024 now and full self-driving, despite the name, is decidedly not that; Musk even felt the need to caveat it with a “supervised” in the recent tweet announcing the big push on sign-ups. However, the idea that Tesla will crack autonomous driving is the key to having its stock trade on a tech-like earnings multiple north of 50 times, rather than closer to a Detroitlike 5 times. That is especially so when Tesla is doing distinctly Detroit-like things, such as offering discounts to clear a swelling backlog of inventory.
I have no doubt that something will be unveiled on 8 August. As with Musk’s riposte to the original story on Friday, his after-market announcement lacked details. Perhaps, finally, despite all the false starts and missed deadlines, Tesla will reveal a car that can actually drive itself from Los Angeles to New York and then park itself—a vision Musk touted when Barack Obama was still US president. Perhaps not. Maybe it will be something else. Unveiling the physical design for a robotaxi—pending the actual roll-out of fully autonomous capabilities and regulatory approval, you understand—is also one potential outcome.
For the Tesla faithful, that could be enough. For everyone else, it might be worth remembering that Elon Musk has been known, at a moment of stress on Tesla and himself, to tweet the odd grandiose, less-than-concrete claim. Robotaxis secured?