Tesla Decision To Pause $25,000 Vehicle Could Be 'Thesis-Changing': Analyst Looks For Clarity On Robotaxi Timeline

Reports of electric vehicle company Tesla Inc (NASDAQ:TSLA) abandoning plans for a $25,000 vehicle were one of the key headlines last week.

An analyst breaks down what the reported decision could mean and how the company's robotaxi strategy could be more important.

The Tesla Analyst: Deutsche Bank analyst Emmanuel Rosner has a Buy rating on Tesla and lowers the price target from $200 to $189.

Related Link: Gene Munster Backs Tesla’s Focus On Robotaxis Over Low-Cost EV, Gary Black Skeptical Of Strategy: ‘Institutions Would Dump The Stock’

The Analyst Takeaways: The news that could see Tesla abandoning its $25,000 vehicle could be "thesis-changing" for the electric vehicle company, Rosner said.

The analyst questions if the news is bullish or bearish.

"With still many questions unanswered, it may be too early to tell if it is particularly bearish, or potentially positive," Rosner said.

A Reuters report said Tesla was scrapping plans for a $25,000 consumer electric vehicle that was planned for 2025. Instead, the report said Tesla will put its focus on the highly anticipated robotaxi.

Shares of Tesla fell on the report. Tesla CEO Elon Musk said the Reuters article was full of lies, but failed to clarify what the real story was. Musk also tweeted that the Robotaxi will be unveiled on August 8, which prompted more questions.

"As of now, it is unclear if a drivable version of Model 2 is still coming and if so when; how far along is robotaxi in its development and what a realistic timeline for deployment is in light of considerable technology and regulatory hurdles ahead."

Tesla will report first quarter financial results on April 23, which Rosner said could be a chance for the company to provide some comments on these items above.

"We view it as plausible that Tesla put its Model 2 efforts on [the] back burner in light of issues ramping up its 4680 battery capacity at the right cost, and growing competition from Chinese OEMs at even lower price points."

The analyst said a reversed course to focus on robotaxis and step away from the Model 2 could "command more favorable economics" for Tesla.

"This would avoid going down the rabbit hole of bruising global competition for the cheapest EV, and position Tesla as an AI play, rather than a volume automotive OEM."

Rosner cautioned that some shareholders might own Tesla stock for the Model 2 potential and shares could see increased pressure if the Model 2 is being put on hold.

"Model 2 indeed has been Tesla's nearest-term opportunity to reaccelerate volume, margins and FCF, after years of declining earnings and limited volume growth due to an aging vehicle lineup and growing global EV competition."

The analyst said that some downside risk for Tesla could already be priced in, but earnings estimates for 2026 and beyond would likely be revised down if the Model 2 is not launching on its previous timeline.

"We would also worry about the catalyst path from here, post Aug 8, as any production and rollout of Robotaxi could still be years away."

The analyst said an acceleration of Robotaxi alongside the existing timeline for Model 2 would be a positive signal, while the Model 2 being pushed back or canceled could significantly alter the outlook for Tesla.

TSLA Price Action: Tesla shares were up 5% to $172.98 on Monday versus a 52-week trading range of $152.37 to $299.29.

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Image generated using artificial intelligence via Midjourney.