Tesla’s plans for new cars gives investors something to hope for

You’d have thought Elon Musk was handing Wall Street a bouquet instead of one of Tesla’s worst quarters in years. After all, his electric carmaker posted Ls across the board for the first three months of the year, performing even worse than analysts expected.

Investors already knew that Tesla was struggling, though. It was selling fewer vehicles even as it cut prices; it was laying off more than 10% of staff. The surprise was that Tesla was speeding up its rollout of new models—among them more affordable EVs—to early 2025 instead of later in that year. The potential for more affordable EVs to reverse Tesla’s fortunes after a year of losing market share was more than hope enough for Wall Street, where Tesla stock price shot up as much as 18% over its pre-earnings price.

“This is exactly what investors wanted to hear after a wave of doubt about the company’s commitment to producing a new mass-market car,” the Wall Street Journal reported.

To get a sense of just how pleased investors were by news of new models, take a look at some of the results they were willing to overlook as they bought up shares: Car sales revenue down 13%, overall revenues down 9%, profit 55%. Profits haven’t fallen that much since 2021, and revenues since 2012. Its inventory of unsold vehicles also nearly doubled compared to Q1 2023. Its price cuts as an attempt to juice sales have eaten into margins, putting the company “into cash preservation mode,” Emmanuel Rosner, analyst at Deutsche Bank, told the Wall Street Journal, which lowered its price target for Tesla stock by ~54% to $123. Before reporting, its stock was continuing the steep decline it charted over the past quarter and in the months prior.

Tesla needed the good news, too. The company has struggled as overall sales of electric vehicles have slowed. First-quarter sales of EVs were ~3% higher than last year, a huge reduction in pace from Q1 2023, when year over year sales growth was 46%, according to Cox Automotive. That was itself a slowdown from the first quarter of 2022, which recorded an 81% increase. Tesla also lost market share: It sold 51% of new electric vehicles compared in the first quarter, down from 62% a year ago. In late March, Cox Automotive estimated overall US car sales, most of which are gas powered, to have grown nearly 6% in the first quarter.

Confidence masterclass. On April 17, the Tesla board released their draft proxy statement asking for shareholders to sign off again on Musk’s $55.8 billion compensation agreement.

The 2018 agreement which a Delaware judge voided in January over the “deeply flawed” process through which Tesla’s board secured approval from shareholders, who did not know about the personal and financial ties that some board members had with Musk. Shareholders will vote whether to re-ratify Musk’s pay at Tesla’s annual meeting in June, when the company’s board is also asking shareholders to approve the company to move the corporation’s registration to Texas from Delaware, home of the chancery court that canceled the pay package. Musk also said he may buy back shares as part of a plan to own 25% of the company, according to the WSJ.