Tesla shares soar 12% on stock market after accelerating plans to produce cheaper cars | Financial markets

At the start of this Wednesday’s session, Tesla shares were worth about $60 billion on the stock market. In a matter of minutes, it became worth more than traditional auto giants like General Motors or Ford are worth. The stock market rally for the Elon Musk-run company also came after reporting disappointing results, with vehicle sales, revenue and profits falling. The reason for the stock market explosion was the announcement that the company would speed up the release of its new models, including the most affordable ones, although without any details. At the same time, the stock price at the opening soared by 12.7%, to $163 per share.

The stock market’s rally this Wednesday confirms the reaction that occurred on Tuesday after the results were released, outside normal trading hours. The reaction comes after the company has left more than 40% of its value in the stock market since the start of the year due to poor sales performance and doubts about the company’s strategy and competitive position. Last year, China’s BYD became the company that sold the most electric vehicles, and even price cuts failed to revive demand for the Elon Musk-led company’s cars.

One of the concerns of analysts and investors after the information was published on this matter was that Tesla would abandon plans to release a more affordable model and put all its eggs in the robotaxi basket – the autonomous cars it is developing. While demand for cheaper Teslas seems assured, the success of the self-driving car, including obtaining the necessary regulatory approvals, remains a pipe dream.

Elon Musk said one of two things on a conference call with analysts. The idea is that the company will sell more conventional electric vehicles, including cheaper models, to make more money by betting on an autonomous vehicle, ultimately justifying Tesla’s price at 10 times that of Ford or General Motors.

General Motors achieved revenue of $43.014 million in the first quarter, up 7.6%, and profit of $2.980 million, up 24.4%. Tesla’s revenue fell 9% to $21.301 million, and profits fell 55% to $1.129 million. That is, Tesla is worth 10 times more than GM, despite the fact that the Detroit firm earns double the revenue and almost triple the profit.

“If anyone doesn’t believe that Tesla is going to solve the problem of autonomy, I don’t think they should be an investor in the company,” Musk even said on a conference call with analysts. Company shared via social network a preview of what Tesla’s autonomous taxi transportation app will be like. It appears that the company is aiming to develop a service that directly competes with Uber.

But until the company pioneers self-driving vehicles on a large scale and revolutionizes the auto market, it first needs to continue selling conventional electric vehicles, and do so at a faster pace. The company announced that it has updated its plans to accelerate the launch of new models, including more “affordable” ones, and that this will happen before the second half of 2025. “We’re hoping it’ll be early 2025, if not late this year,” Musk said on a call to discuss the results.

Without details

Some analysts doubt the company will be able to meet that schedule, especially given its history of systematic launch delays. It is unknown how quickly new models will be launched, how different they will be from the current ones and how much cheaper they will ultimately be.

In January, the Tesla executive said he was preparing to begin production of a new, cheaper car next year priced at about $25,000 called the Model 2. On Tuesday, he did not provide details, but clarified that the new cars could be built on the same production lines , the same as the current lineup, although they include aspects of what the company calls its next-generation platform.

“This update may result in smaller cost reductions than expected, but will allow us to intelligently grow our vehicle sales in a more cost-effective manner during uncertain times,” the company said. “This will help us fully utilize our current planned maximum capacity of around three million vehicles, allowing us to increase production by more than 50% compared to 2023, before investing in new production lines,” he added.

“In the midst of the current price war, especially in China, and with the company’s prospects of entering the Indian market, the word ‘affordable’ has resonated like music in the ears of shareholders,” says Thomas Monteiro, an analyst at Investing.com. . “This means the company will be able to make more efficient use of its gigantic production capacity while maintaining the original offering of its high-end models,” he adds.

The company is plunged into a massive workforce reduction, laying off more than 10% of its 140,000 employees worldwide. Try to improve efficiency and reduce production costs.

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