Stock Market

Investor’s Business Daily published an article on April 24 discussing the 10 S&P 500 stocks with the largest losses in market capitalization in 2024. In the second spot is Tesla (NASDAQ:TSLA) stock, with a loss of $328 billion or 42%. The only name ahead of Tesla stock is Apple (NASDAQ:AAPL), which has lost $433 billion.

Investors question if Musk’s offer to fast-track cheaper EVs was a tactic to halt losses. After investors stop selling, he’ll focus on robotaxis and other unconventional ideas again.  Is Tesla stock still a good investment without an affordable electric vehicle? I’ll look at both sides of the argument.  

Is a Model 2-Like EV Necessary?

I have always wondered why Tesla bothered with the Cybertruck. Its contentious design would ensure that it never gained a place in most American driveways. 

With EV sales in a holding pattern, the Cybertruck looks even sillier. I’m not even talking about the recent recall of nearly 4,000 of them — all the Cybertrucks sold since their launch last February — because of a sticky accelerator. 

There were so many vehicles he could have built instead of the Cybertruck, the most obvious being the Model 2. But he didn’t, and now its share price faces a challenging uphill climb. 

While the Model 2 is dead, Musk crossed his heart and swore to die that cheaper EVs would be here ahead of its original 2H2025 launch date. The only problem is there needs to be details about what these vehicles will look like or sell for. 

According to reporting from CarScoops.com, a survey by GBK Collective of 2,000 Americans found over half were looking to buy either a BEV (battery electric vehicle), PHEV (plug-in hybrid vehicle) or HEV (hybrid electric vehicle) for their next purchase. 

That’s the good news. The bad news for Tesla stock is that consumers plan to be far more discriminant than previous buyers. 

“The study learned that this new potential customer group only had a median budget of $50,000 for their next vehicle, whereas current EV owners were shopping with a $59,000 kitty,” stated CarScoops.com contributor Chris Chilton. 

On the surface, many buyers might be OK with a Model 3 or something similar, making a Model 2 redundant. 

The Biggest Problem With the Status Quo

Tesla has already sold vehicles to most prospective buyers without concerns about price. Selling to the next cohort will be much more challenging.

An October 2023 article from Bloomberg pointed out that with the recent price cuts, the base Model 3 sold for just under $39,000, well under the survey respondent’s $50,000 budget. Further, the Model Y was selling for around $44,300, $3,700 below the average sale price for a new vehicle in the U.S.

So, right there, these buyers have two Tesla vehicles already within their price range, so what’s holding them back?

For starters, higher interest rates and inflation have consumers thinking long and hard about big-ticket items such as EV purchases. While someone in a survey says they’ll spend $50,000 on some type of EV as their next purchase, when push comes to shove, it will be tough for them to part with the money without getting a significant deal. 

They’ll want considerable bang for their buck to give up their gas-powered vehicle for something electric, knowing that EV sales have slowed considerably.

If Tesla brought out a vehicle that slots between the Model Y/Model 3 and Model X/Model S, it could lure these survey respondents into purchasing. 

The Model 3 isn’t moving them from tire kickers to buyers. 

The Bottom Line on Tesla Stock

Elon Musk continues to push software-related products to maintain its technology valuation rather than just become another car company. 

It cut its FSD (full self-driving) software package by 33% to $8,000 and the monthly subscription price from $199 to $99, which is reasonable considering inflation. But I digress.  

I don’t know where I read it, but I saw an estimate the other day that FSD is in 10% of all Tesla vehicles and is rising quickly. 

While it doesn’t hurt to have this recurring revenue, the name of the game is still to sell as many vehicles as possible. Tesla has spent billions to develop its five models. To say it’s not an automaker is to deny its heritage and reason for being. 

If you own Tesla stock, I’d continue to hold. If you don’t, I’d be in no hurry to buy its stock. Let this latest strategy change play out first. 

On the date of publication, Will Ashworth did not have (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.

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.

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