Tesla’s New Affordable Model Could Spark a 2020 Repeat, Says Analyst
Tesla Inc.‘s (TSLA) trajectory this year is eerily similar to its performance in 2019, according to Gary Black, managing partner of The Future Fund LLC, who believes history might be about to repeat itself. Just as the release of the Model Y in 2019 propelled Tesla’s stock upwards, the imminent launch of a more affordable Tesla model in 2025 could result in a similar surge.
Key Takeaways:
- Echoes of 2019: Black draws parallels between Tesla’s current situation and its pre-Model Y release period in 2019.
- Both periods saw short sellers doubting the success of a new model, believing it would cannibalize existing sales.
- Both periods saw the new model (Model Y then, a cheaper model now) dramatically expand Tesla’s potential customer base.
- Both periods saw short sellers underestimate the positive impact the new model would have on Tesla’s earnings and stock price.
- History Repeating?: Black believes the new affordable model, slated for production in the first half of 2025, will significantly expand Tesla’s total addressable market. He predicts it will sell "every TSLA Compact it makes" boosting earnings and leading to a stock price surge, mirroring the positive impact of the Model Y in 2020.
- More Affordable, More Sales: Tesla’s CEO Elon Musk has acknowledged the rising competition from more affordable electric vehicles (EVs) but has asserted that Tesla will remain competitive. The anticipated new model, priced between $25,000 and $30,000, will directly compete in the affordable car segment, opening up Tesla to a broader market.
A New Model, A New Era?
The potential impact of Tesla’s upcoming affordable model goes beyond just increased sales. This launch could be a significant turning point for the company, marking its entrance into a highly competitive market segment with a vast customer base. Here’s how:
Expanding the Addressable Market:
Tesla’s current entry-level vehicle, the Model 3, starts at $38,990, making it inaccessible to many potential customers. The new, cheaper model targets the price range of conventional gasoline-powered vehicles, appealing to a broader audience and significantly expanding Tesla’s customer base. This could mean increased sales, higher revenue, and improved profitability, potentially leading to a positive feedback loop on Tesla’s stock price.
The Battle for the Mass Market:
The sub-$30,000 price range is a bustling arena for automakers, both traditional and newer EV brands. Tesla entering this segment will heighten the competition, forcing it to innovate and refine its offerings to stand out. This could stimulate further development of Tesla’s technology, resulting in more sophisticated and efficient vehicles, ultimately benefiting consumers.
Implications for Tesla’s Stock:
Black’s prediction of a stock price surge is based on the historical success of the Model Y and the potential for similar positive earnings revisions when the new model launches. However, several other factors might influence Tesla’s stock performance, including:
- Competition: The new model’s success largely hinges on its ability to withstand the pressure from well-established competitors in the affordable segment.
- Supply Chains: Production and supply chain disruptions can significantly hinder a new product launch, potentially affecting Tesla’s performance.
- Consumer Sentiment: Economic conditions and consumer confidence play a significant role in purchasing decisions. Changing market conditions could impact demand for new EVs.
While Tesla’s future remains uncertain, the upcoming affordable model serves as a potential catalyst for significant growth. Investors and analysts will be closely watching how this new vehicle performs in the challenging market landscape, and its impact on Tesla’s stock price will be a key indicator of the company’s future trajectory.
