Tesla‘s (NASDAQ: TSLA) shares have performed well over the past two years, significantly outpacing broader equities. That’s a bit odd considering the company’s deliveries of electric vehicles (EVs) have declined in each of its two most recent fiscal years. The company’s revenue and net income have also been unimpressive over this period. Can the carmaker boost its EV business and improve its financial results? Recent reports of one of Tesla’s projects could eventually allow it to do that. Let’s look into it.
Will AI create the world’s first trillionaire? Our team just released a report on the one little-known company, called an “Indispensable Monopoly” providing the critical technology Nvidia and Intel both need. Continue »
Tesla is rumored to be working on a brand-new and cheaper EV model. It’s important to highlight that these plans are apparently still in the early stages, and production hasn’t officially started. However, according to reports, the company will first launch this model in the Chinese market before expanding to other regions. Here’s why this could be a game changer for Tesla.
The company is facing increased competition. Domestically, it will soon have to contend with Rivian‘s R2 — which was set to start shipping to customers in the second quarter — and will compete with the Model Y, Tesla’s most popular EV (and also the single best-selling vehicle in the world, even including non-EVs). Meanwhile, Tesla has been outpaced by the Chinese EV maker, BYD Company.
Part of BYD’s appeal is that it offers more EV options, including some for price-conscious customers. Tesla launching a cheaper car could help it wrestle back some market share in China and perhaps attract a far larger pool of consumers worldwide. This is important considering the company’s long-term strategy. While vehicle sales make up most of the company’s revenue, it’s not a particularly high-margin business, and it can be unpredictable from one year to the next.
A larger installed base will help boost the company’s higher-margin recurring revenue from FSD (fully self-driving) subscriptions. An increasing number of cars on the road also gives Tesla access to more real-world data to improve its FSD system. So, offering cheaper cars could have a positive ripple effect on the business.
Tesla’s future isn’t just about its EVs. The company is increasingly shifting toward developing its humanoid robot, Optimus. That’s partly why Tesla decided to discontinue its Model S and Model X and repurpose space in its Fremont factory in California to building its robots. The AI robotics market could represent a massive opportunity, one that Tesla is well-positioned to capitalize on.