Tesla stock down sharply as Investor Day lacks details on next-gen car

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Tesla (TSLA) shares moved sharply lower Thursday following its Investor Day presentation the night before, at which the automaker addressed topics like CEO Elon Musk’s “Master Plan 3” and vehicle design but did not reveal a design or specifics about its “generation 3” upcoming car.

“We will have a proper sort of product event, but it would be jumping the gun if we answer your questions [now],” Musk said in response to a question about the generation 3 car during a Q&A session last night.

Though Musk and the Tesla team discussed AI, charging infrastructure, and supply chain improvements from Gigafactory Austin, the main disappointment was the lack of any concrete details on its next generation 3 car design, though it did reveal that two upcoming models will be joining the Tesla product portfolio, and its next gigafactory would be located in Monterey, Mexico.

Tesla shares were down nearly 6% in Thursday's session.

“While Musk presented his ‘Master Plan Part 3’ intending to spark confidence and excitement about Tesla’s future, investors were underwhelmed … They were listening intently for more meat on the bones regarding Tesla’s concrete 2023 plans to remain competitive in an increasingly crowded and price-sensitive EV market,” said AXS Investments CEO Greg Bassuk in a note to clients.

“Seven models from other automakers already are priced lower than Tesla’s Model 3 sedan, the company’s least expensive model, while even more EV automakers are racing aggressively into this space in 2023,” he said.

The lack of specificity on that generation 3 car, expected to be Tesla’s cheapest offering at around $25K - $35K MSRP, is likely weighing on the stock, and on Wall Street analysts’ minds, as some are more bullish on the company long-term.

Tesla Investor Day presentation
Tesla Investor Day presentation (Tesla Investor Day presentation (screenshot))

"Though Tesla's plan to launch a $25K EV isn't new, mass-market competitors will need their own roadmaps to profitably compete at those price-points in the coming few years," Citi's Itay Michaeli said in a note to investors. Michaeli notes that Tesla reiterated its prior goal of reaching 20 million units by 2030, and provided "incremental color" on how it would achieve that goal.

“While there were no specific details for the lowered price next generation Tesla in the sub $30K range as the Street had been anticipating which will cause a knee-jerk modest sell-off this morning, the stage is set for this car to be produced and scaled globally,” Wedbush analyst Dan Ives said in a note published this morning.

Ives noted that Tesla’s broad-ranging presentation last night lays out a vision for a company operating at a different level than competitors, when it comes to factory utilization efficiency, vertical supply chain depth, and deep integration of its software services and its products.

Tesla did reveal that its generation 3 platform will likely cost half as much as its other vehicle platforms from a production point of view, use around 40% less factory space to produce, and use electric motors that won’t require expensive rare-earth metals.

These long-term bullish production factors have Ives seeing the event as success for the brand.

“For investors it's crystal clear just how far ahead Tesla is ahead of the rest of the auto industry when it comes to producing and scaling EVs, with last night another display of the pure breadth and scale of Tesla globally,” Ives said.

With regards to the new factory announcement for Mexico, which will be Tesla’s fifth Gigafactory, it is expected that it will build the next generation vehicle and others on that platform. Tesla will aim to focus all its learnings and efficiencies into this factory and leverage cheaper labor costs to build the affordable Tesla, that Ives believes we will likely see on the roads in 2024.

Though long-term it seems Tesla is in a strong position, and it showcased its strength last night with its wide ranging Master Plan 3 strategy and deep executive bench, it will be little solace for investors feeling short-term pain today.

For others, it just may be a buying opportunity.

Pras Subramanian is a reporter for Yahoo Finance. You can follow him on Twitter and on Instagram.

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