Tesla is developing a new cheaper electric car, Reuters has learned. What's up with the stock?

Tesla is developing a new compact and budget electric crossover (SUV), four sources told Reuters. It will be a completely standalone model, not a modification of the current Model 3 or Model Y.

In recent weeks, the company has been discussing with suppliers a plan to create a new product, the agency's interlocutors added. They were talking about production processes and technical characteristics of components.

Tesla did not respond to Reuters' request for comment. Agency sources emphasize that the project is at an early stage of development. The agency was not able to find out whether the "green light" for mass production has been given. Tesla has repeatedly delayed the release of novelties or canceled them altogether. For example, the company presented prototypes of the Roadster supercar and the Xi truck back in 2017, but the former has not appeared on sale, and mass production of trucks has not yet been launched, Reuters specifies.

Production will begin in China, with Tesla planning to eventually set up production in the US and Europe, three sources said. The car will be about 4.28 meters long - less than the Model Y. To make the novelty lighter (about 1.5 tons) and more affordable, the company plans to use a single electric motor and a smaller capacity battery, which will result in a lower range than current models, Reuters reports, citing the sources.

The price of the novelty will be significantly lower than the Model 3, which costs from $34,000 in China and $37,000 in the U.S., Reuters' sources specify.

The development of the cheaper car follows Tesla CEO Elon Musk's decision in 2024 to shut down the budget electric car project and focus on robotaxis and humanoid robots. The main question now is whether the development of a new SUV means a return to mass-market electric cars driven by humans or whether the model will be in line with Tesla's vision of fully autonomous transportation, Reuters writes.

A source among Tesla employees explained to the agency that the company is now looking to create models that will be unmanned but retain the option of manual control. Tesla realizes that many global markets won't be ready for fully autonomous driving - either technically or legislatively - for years to come. Retaining the steering wheel and pedals will allow the company to maintain high sales and factory utilization, Reuters reports.

Analysts are predicting a third year of decline for Tesla in sales of its electric cars, which generate the bulk of its revenue, Reuters recalls. Tesla has a market capitalization of about $1.3 trillion - well ahead of its financial performance, even when compared to its successful tech peers. Last year, investors approved a compensation package giving Musk up to $1 trillion worth of Tesla stock tied to a number of product and financial targets.

The automaker plans to begin production in April of the two-door Cybercab robotaxi, first unveiled as a concept in 2024, without pedals or a steering wheel. But it remains unclear when the vehicle will go on sale or start being used in a fleet of robotaxis operated by Tesla.

After the opening of trading on April 9, Tesla shares were falling by about 1.7%, but then changed direction and moved to growth by about 0.5%. The market as a whole showed similar dynamics.

The most popular recommendation of analysts is to buy Tesla securities: such opinions 26 out of 56 in total, MarketWatch shows. At the same time, 21 analysts recommend to keep the shares in the portfolio, and nine advise to sell. But for the last month the share of "bullish" recommendations increased from 42% to 46%.

The average target price is about $408 per share, up 20% from the price after the opening bell on April 9.

This article was AI-translated and verified by a human editor