For years, investors and consumers alike have wondered when Tesla (NASDAQ:TSLA) will build an affordable electric vehicle (EV). Experts have theorized that in order for EV adoption to truly take hold, costs for everyday buyers will need to come down. When the EV race first took off and competitors began pumping out less costly vehicles, Tesla continued to build its sleek, trendy cars with higher price tags. However, even after opting for multiple price cuts, Tesla’s recent disappointing third-quarter earnings report provided evidence that these measures didn’t spur growth. Today, however, TSLA stock is in focus on news that an affordable Tesla EV may finally be coming
While CEO Elon Musk has teased this product before, that news has been hard to take seriously given his history of making bold claims. Now, though, Tesla may actually be on the verge of an important new product that could change the EV market — and potentially boost TSLA shares.
What’s Happening With TSLA Stock?
This morning, reports broke about Tesla’s plan to start building an affordable EV at its Berlin Gigafactory. The announcement initially boosted TSLA stock although this early rally has not lasted. As of this writing, Tesla stock is down by about 1%. The performance of shares has been fairly volatile, though, making it impossible to predict the direction they will move from here. And after failing to meet Wall Street estimates for Q3, Tesla certainly needs a positive catalyst.
What do we know about the new affordable Tesla EV? As of now, not a lot. When Reuters reported the story this morning, the outlet cited an unnamed “source with knowledge of the matter.” Of course, Musk has issued no statement on the news. But according to the article, Tesla will build the EV in Berlin and price it about 25,000 euros, or $26,838.
Still, there is no news as to when production will begin or what the vehicle will be called. Per Barron’s:
“Investors, and car buyers interested in EVs, have long awaited a smaller, lower-priced Tesla. Investors have taken to calling in the Model 2 although there is no official name yet. The Model 3, released in 2017, was Tesla’s first mass-market vehicle. Tesla started out shipping the higher-priced Model S sedan and Model X SUV.”
As noted, Tesla fans have likely been waiting years for this kind of news. But is this update good for TSLA stock in terms of long-term growth prospects? Not necessarily.
What Comes Next?
This development feels like something straight out of the Tesla playbook. It will likely stir up retail investors and create enough superficial buzz to push TSLA stock up in the short term. But as always, it’s important to examine this news from a macro perspective.
We still have very little information about Tesla’s new affordable EV. Until the company provides more concrete details on the matter — such as when the EV will be released and can be pre-ordered — TSLA stock likely won’t see much growth, if any.
For that reason, investors should be careful not to get too excited by this news. Having an affordable EV could certainly help Tesla when it can show the product and provide more details about it. But until that happens, this news probably won’t be the catalyst that Tesla needs.
On the date of publication, Samuel O’Brient did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
