Key Takeaways
- Shares of Tesla slid to their lowest level in more than a year on Thursday after Deutsche Bank analysts downgraded the stock and lowered their price target by 35%, citing its “thesis-changing” pivot to robotaxis.
- The company has reportedly put plans for a low-cost, mass-market model on the back burner to focus on developing a fleet of self-driving taxis.
- Tesla has struggled to compete with Chinese rivals and maintain growth amid soaring costs and sluggish demand for electric vehicles (EVs).
Tesla (TSLA) shares slid to their lowest level in more than a year Thursday after Deutsche Bank analysts downgraded the electric vehicle (EV) maker’s stock, citing uncertainty around its plans to refocus its growth efforts on autonomous vehicles.
Deutsche Bank analysts led by Emmanuel Rosner downgraded Tesla to “hold” from “buy” on Thursday and lowered their price target by 35%, to $123 from $189.
“Our longer-term Buy rating was predicated on the next-gen vehicle priced at $25k coming late next year, which would allow the company to reaccelerate volume, margins and [free cash flow], and potentially come to dominate the Western EV market,” Deutsche Bank analysts wrote on Thursday.
Whether that low-cost Tesla model, sometimes called the Model 2, is being made at all was called into question earlier this month when Reuters reported the EV maker had canceled its plans to release a low-cost, mass-market model. Tesla will instead focus on self-driving robotaxis, according to Reuters, which cited “three sources familiar with the matter and company messages” reviewed by the outlet.
Tesla Chief Executive Officer (CEO) Elon Musk quickly took to his social media platform X to deny the report. That denial was followed up by an announcement later in the day that the company would unveil its robotaxi on Aug. 8.
The analysts noted that, while a Tesla-owned and operated fleet of robotaxis could more than make up for the profit lost by delaying or canceling its low-cost model, the plan poses significant technological and regulatory challenges. Plus, “a pushout of Model 2 efforts creates the risk of no new vehicle in Tesla’s consumer lineup for the foreseeable future, which would put continued downward pressure on its volume and pricing for many more years, and likely require material downward earnings and FCF estimate revisions for 2026+.”
Tesla has struggled to compete with Chinese rivals and maintain growth amid rising costs and sluggish EV demand, which has taken a hit from high interest rates. Earlier this month the company reported its first year-over-year decline in quarterly deliveries since 2020.
The company said in an internal memo earlier this week that it would lay off “more than 10%” of its global workforce, a decision Deutsche Bank analysts speculate could be connected to the delayed or canceled Model 2.
Tesla shares were down 3.6% to $149.81 as of 1:55 p.m. ET Thursday. They have lost nearly 40% of their value in 2024.