After Tesla's stock price plummeted due to data delivery in the first quarter, an exclusive media report once again pushed it to the forefront.

On Friday local time, media reports said that Tesla had abandoned production plans for the cheap model Model 2 and instead concentrated on developing autonomous robot taxi technology.

Musk was quick to respond, posting on the X platform accusing the media of “lying,” without pointing out any specific mistakes.

After media reports, Tesla's stock price once plummeted by more than 6%, but after Musk posted, it recovered part of the decline. By the close of Friday, the decline had narrowed to 3.6%.

Shortly after, Musk posted on X: “Tesla Robotaxi will be unveiled on August 8,” and Tesla's stock price counterattacked in response to after-hours trading.

This seems to suggest that Tesla may have switched its focus to Robotaxi, which confirms previous media reports that Tesla is abandoning the development of cheap cars.

Investors once saw cheap cars as a new growth point for Tesla's performance, but now this beautiful vision has come to nothing. Meanwhile, in the face of numerous regulatory hurdles, high costs, and the reality that autonomous driving technology is not yet mature, Robotaxi may not be able to support Tesla's next stage of growth.

Competition in the global electric vehicle market is intensifying, Tesla sales continue to weaken, and once enviable profit margins are shrinking. The biggest problem Tesla faces is no longer whether it can produce enough cars, but whether people will buy them.

Since this year, Tesla's stock price has plummeted 34%, making it the worst performing constituent stock in the S&P 500 index. Although Tesla is still the world's highest automaker by market capitalization, its market capitalization has shrunk by more than half from its peak in 2021.

“Tesla is moving from a golden age into a challenging era,” said Mark Fields, former Ford CEO.

When Tesla was at its best, Musk turned his gaze to robots

Looking back at history, Musk planted the seeds of trouble three years ago.

In 2021, Tesla emerged from several years of financial difficulties and production quagmire, and profits continued to reach new highs, and no one could match the momentum.

At the time, the chip shortage forced many competitors to cut production, but the Tesla factory was still running at full speed. Consumer demand is booming. Even with Tesla's frequent price increases, orders for new cars are still a few months behind schedule, and there is even a premium for used cars.

As a result, other car companies are competing to follow Tesla and catch up on the electric car circuit, and Musk has already set his sights on artificial intelligence robots to lead the next wave.

In the summer of 2021, Musk appeared at the Tesla Job Fair in Palo Alto in his iconic black body and announced Tesla's latest achievement, the humanoid robot Optimus.

At the time, Musk told the audience: “Tesla is much more than an electric car company. In the future, manual labor will be an option.”

In late October 2021, car rental company Hertz said it was ordering 100,000 Tesla cars to expand its electric vehicle fleet. For investors, the deal means electric cars are becoming mainstream, and soon more drivers will have the chance to try them out.

At the beginning of November 2021, Tesla's market capitalization finally surpassed 1.2 trillion US dollars, surging more than 20 times in two years.

However, the good times didn't last long.

Musk began selling Tesla shares, which continued for more than a year, and cashed out more than 39 billion US dollars, causing panic in the market. Part of the capital was used to acquire Twitter, putting pressure on Tesla's stock price.

Supply chain issues are highlighted. Musk shelved the cheap car plan and instead vigorously developed the more costly FSD

Entering 2022, more accidents will follow.

Musk announced that due to supply chain issues, he would not launch new models that year, and the budget car development plan was also put on hold. At the time, Tesla sold 4 models, and Model Y and Model 3 contributed most of the sales volume.

“We have enough on our plate right now,” Musk said.

For car companies that rely on new products to attract consumers, this move is extremely risky. Analysts question whether Tesla can meet its growth targets with existing models.

Musk is unconvinced by this concern. Instead, he hinted at his vision for the future: Tesla cars will be able to run automatically around the clock, making them more valuable.

Musk said, “Judging from the problem, the importance of autonomous driving (FSD) is not fully understood.”

Now it seems like Musk has long been betting Tesla's future on autonomous driving, particularly Robotaxi.

In the second half of the year, Tesla's most important sign of weakness in the Chinese market showed, and the waiting time for a new car plummeted from more than 4 months to 1 month.

Executives urged Musk to restart the cheap car program, saying it is the key to achieving growth and supporting autonomous driving projects, but Musk insists on developing Robotaxi, and he is more interested in developing autonomous vehicles that can operate in robot taxi fleets.

Subsequently, FSD technology developed rapidly, and Tesla's sales performance was disappointing.

In order to stimulate demand, Tesla cut prices in China by 7% in October, then introduced car purchase discounts one after another in the US. However, Tesla's end of 2022 still disappointed the market. Although its annual car deliveries increased 40% year over year, it fell short of the company's initial target and fell short of Wall Street expectations.

Throughout 2022, Tesla's stock price recorded its worst annual performance in history, falling 65%.

Without Tesla's new car, big price cuts aren't enough to convince consumers to pay

In January 2023, Tesla was forced to drastically cut prices globally, with a maximum drop of nearly 20%. This is tantamount to a big gamble, but Musk believes that with higher profit margins, Tesla can withstand the price war and can also use the opportunity to put pressure on competitors.

This strategy has indeed boosted Tesla's sales for a while. According to Wells Fargo data, Tesla car prices fell by an average of 12% globally in the first half of 2023, and deliveries increased 19% compared to the previous six months.

But in the second half of 2023, that strategy seems to have failed. Tesla continued to cut prices and increase incentives, but growth in the company's car deliveries slowed to 3%, a figure that Wells Fargo analysts called “worryingly low.”

Some people in the automotive industry are also beginning to be unhappy with electric cars.

Dealers are worried about inventory backlogs, and car companies have cut their investment in electric vehicles one after another and switched to more best-selling hybrid models. Tesla itself has no plans for new models other than the highly anticipated Cybertruck, which is frequently ticketed.

Competition in the Chinese market is even more intense. Local brands such as BYD are speeding up the launch of affordable electric vehicles, seizing opportunities in the domestic market and beginning to expand overseas.

Hertz, the car rental giant that bought Tesla in a big way, also sold one-third of its electric cars due to the low value preservation rate of electric vehicles and high maintenance costs. Most of them were Tesla cars.

Then there was news from earlier this week. In the first quarter of 2024, Tesla's global deliveries fell 8.5% year on year to 386,800 vehicles, the lowest since the third quarter of 2022, far below Wall Street's lowered expectations.

Meanwhile, since the acquisition of Twitter, Musk has frequently voiced sensitive issues on social media, and the negative impact has been further revealed. Market intelligence firm Caliber says that from September 2022 to March 2024, Tesla's “considering purchasing rate” among US consumers fell from 46% to 35%

Faced with declining performance, Musk argued during a conference call in the first quarter that Tesla is in a transition period between two growth weeks.

The first wave began with the Model 3/Y's global expansion, and we believe the next wave will be triggered by the global expansion of the next generation of automobiles.

He pinned his hopes on the next generation of electric cars, which were scheduled to be put into production at the end of 2025, including a cheap car. According to media reports at the time, Tesla may have named this cheap car Model 2, which will cost around $25,000. This made Wall Street look forward to Tesla's future once again.

However, as Robotaxi is scheduled, outsiders speculate that the cheap car plan will once again be put on hold.

Between cheap cars and cybertrucks, shouldn't Musk choose the former?

Although Musk pointed out several issues affecting first-quarter results, including disruptions to the Red Sea supply route and the shutdown of the Berlin plant in Germany, former executives and analysts say Musk must now personally lead Tesla through the most difficult period since the 2018 “crisis.”

A former Tesla executive reporting directly to Musk said, “At the end of the day, he's not a magician, even though he has looked like a magician for the past 15 years.” “Honestly, I don't know what leverage he used. He won't take further price action without a new product.”

“They put their money in the wrong place; they should have put the money in the Model 2, not the Cybertruck,” the former executive said.

Musk also admitted during last year's Q3 earnings call:

“To develop Cybertruck is to dig your own grave.”

Musk previously warned that it would be difficult for Cybertruck to increase production; it may only reach 250,000 vehicles a year in 2025. According to media estimates, the current production rate of 4,680 batteries is only enough to equip 24,000 Cybertrucks a year.

Editor/Jeffrey