Tesla stock soars Elon Musk promises affordable electric vehicles

Tesla stock surges 11% as Elon Musk accelerates plans for more affordable electric vehicles, despite recent profit decline.

Tesla's stock experienced a significant increase of more than 11% during pre-market trading on Wednesday morning following CEO Elon Musk's announcement of plans to accelerate the release of more affordable electric vehicles. This move was aimed at reassuring anxious investors on Wall Street who were still grappling with the latest earnings report, which revealed a significant decline in profits, the lowest seen in a three-month period since 2021.

Dan Ives, a senior analyst at Wedbush Securities, described the current situation facing Tesla and Musk as a "Category 5 storm" after a period of remarkable success. Despite this, Ives remains optimistic, citing a "bullish investment thesis" due to the anticipated launch of a "Model 2.5" - a lower-cost Tesla model expected to hit the market in early 2023.

While Musk did not provide specific details about the upcoming affordable models during the earnings call, he focused on Tesla's efforts to diversify its business into artificial intelligence, humanoid robots, and autonomous vehicles. This shift towards new ventures is based on software and hardware products that are still in development.

Analysts interpreted Musk's comments about the cheaper models being built on existing platforms and production lines as a shift away from previous plans for an entirely new model with a $25,000 price tag. The expectation now is for potentially de-contented versions of the Model Y and Model 3, enhanced with software and AI capabilities, but offered at lower prices.

Despite Tesla's weak first-quarter results, the newly announced plans have helped restore confidence on Wall Street. The company reported a 9% drop in revenue compared to the previous year, with a significant decrease in operating margin and net income. This decline in performance has been attributed to high borrowing costs impacting EV demand and increased competition in key markets like China.

Looking ahead, Tesla anticipates slower growth in 2024 compared to previous years. The company's strategy to introduce more affordable models and diversify its product offerings aims to address these challenges and regain momentum in the market. Shareholders are set to vote on Elon Musk's compensation package in May, which was previously voided by a Delaware court.

The recent turmoil within Tesla, including executive departures and product issues like Cybertruck accelerator pedal concerns, underscores the challenges the company is facing. Despite these setbacks, Tesla remains committed to innovation and growth, with a focus on delivering cutting-edge electric vehicles and expanding its reach in emerging markets. The future success of Tesla hinges on its ability to adapt to changing market conditions and maintain its position as a leader in the EV industry.