(Reuters) -Tesla has canceled the long-promised inexpensive car that investors have been counting on to drive its growth into a mass-market automaker, according to three sources familiar with the matter and company messages seen by Reuters.
The automaker will continue developing self-driving robotaxis on the same small-vehicle platform, the sources said.
COMMENTARY:
SAM ABUELSAMID, PRINCIPAL RESEARCH ANALYST, GUIDEHOUSE INSIGHTS
“I expect that Tesla decided that margins on this new product would be too slim and the likelihood of customers opting to pay extra for FSD (Full Self-Driving) was low.”
“Given how this product was expected to be built, relying heavily on large casting to minimize assembly cost, insurance rates would likely be quite high because this approach makes vehicles far less repairable after a crash. High insurance premiums would also make the car less appealing for those looking for something affordable.”
MICHAEL ASHLEY SCHULMAN, CHIEF INVESTMENT OFFICER, RUNNING POINT CAPITAL
“I applaud Tesla’s bold move to define its EV niche at the high end and not try to be everything to everybody. They are ceding market share for better margins and profitability. They’ve also realized that they can benefit by mastering the charging system for most EVs.”
“This will be a boon for Chinese EV firms, relieving them of a major global competitor on the low end.”
“Tesla’s announcement will probably not be a major setback to the U.S. EV transition, which is suffering more from a lack of demand growth than from supply growth.”
BOB O’DONNELL, CHIEF ANALYST, TECHNALYSIS RESEARCH
“While the idea of robotaxis has been discussed as an exciting potential for years, the practical reality is that we are nowhere near an era when they will become widespread.”
“So this news from Tesla represents a huge blow to the company’s further growth. The engineering challenges for full automation are enormous and practical solutions are many years off. Add to that the slowdown in EV sales overall and the picture for Tesla moving forward looks very difficult.”
TOM HAYES, CHAIRMAN, GREAT HILL CAPITAL
“The (news) confirms what we’ve been saying for some time, that it’s unclear whether consumers actually want EVs or Teslas. It’s a business that’s been subsidized by the government and even with the subsidies, they’re not as attractive as imagined.”
CHRIS PIERCE, RESEARCH ANALYST, NEEDHAM & CO
“It shows that they (Tesla) need to kind of go back to the drawing board and figure out kind of what their next move is going to be because they’re sitting on elevated inventories for the Model Y, which is their best-selling car.”
“I just don’t know that the full stuff driving robotaxi feature that Tesla sees is something consumers are ready for.”
DAN IVES, ANALYST, WEDBUSH SECURITIES
“This would be a dark cloud moment for Tesla. Would be a nightmare if this was scrapped. This would be a major gut punch for the Tesla bull thesis over the next few years.”
(Reporting by Zaheer Kachwala, Harshita Varghese, Priyanka G, Jaspreet Singh and Purvi Agarwal in Bengaluru; Editing by Sriraj Kalluvila)
