0
0
Tesla’s Stock Rally After CEO Disputes Cheap Car Cancellation Report
Tesla’s stock experienced a recovery after a significant drop in trading on Friday, following CEO Elon Musk’s denial of a report claiming that the company was abandoning plans for a low-cost new vehicle. The electric vehicle manufacturer’s stock saw a rise after Musk refuted the news regarding the discontinuation of a budget-friendly car model.
Sources Questioned
According to Reuters, which cited undisclosed sources familiar with the situation and internal communications, Tesla has halted the development of an entry-level electric vehicle (EV) known as the Model 2. This particular model was anticipated to have a starting price of around $25,000, considerably lower than Tesla’s cheapest existing offering, the $39,000 Model 3 sedan.
Elon Musk has long made assurances to investors and consumers regarding the creation of an affordable Tesla EV. Dating back to 2006, Musk initially proposed the idea for a “low cost family car” in his initial “master plan,” outlining a strategy to utilize earnings from luxury vehicle production to fund this project.
Conflicting Reports
Despite Musk’s earlier assertions that Tesla intended to begin manufacturing the Model 2 at its Texas factory in the latter half of 2025, reports emerged a month later indicating that the plans were being put on hold. Employees were informed of the suspension of project-related activities, with instructions given to suppliers to cease all work associated with the model, reassigning engineers to alternative roles.
Challenging the claims made by Reuters, Musk took to his social media platform X to dispute the report, declaring the news outlet as dishonest. This instance marks a pattern, as Tesla has been the subject of critical coverage in previous reports from Reuters. The backlash from the disputed news caused Tesla’s stock to dip by almost 6.2% on Friday, recovering slightly to a 1.6% decline in subsequent trading.
Strategic Shift
In light of the unexpected halting of the Model 2 development, Tesla has shifted its focus away from the affordable vehicle towards the creation of self-driving robotaxis. With ambitions to sell 20 million vehicles by 2030, the company appears to be pivoting towards advancing autonomous driving technology, as reported by Reuters.
Musk’s claims in April 2019 regarding the near-term attainment of fully self-driving technology have yet to materialize, with Tesla still grappling with legal challenges related to its Autopilot and Full Self-Driving systems. Despite ambitions for autonomous vehicles, current regulations only permit limited use of such technologies on public roads, with companies like Waymo facing similar constraints.
Market Challenges
The decision to cancel the Model 2 project came amidst difficulties faced by Tesla in the U.S. automobile market and escalating competition in China, the largest global market for vehicles. Recent financial reports indicated an 8.5% drop in Tesla’s first-quarter sales compared to the previous year, juxtaposed with a 13% sales increase reported by the company’s primary competitor, BYD, which offers electric cars starting as low as $10,000 in China and has been expanding its market reach internationally.
Image/Photo credit: source url
