As Tesla prepares to report results, focus shifts to affordable vehicle launch and Robotaxi delays

Tesla investors are keen to hear from CEO Elon Musk during the upcoming earnings report on Tuesday, particularly regarding two critical issues: the launch of an affordable vehicle and the status of the robotaxi plan.

Wall Street is hopeful that a lower-cost Tesla, expected by the end of the first half of this year, will help revitalize sales, which have struggled amid increasing competition and backlash against Musk’s political stances. Reports indicate that the affordable model may be a simplified version of the popular Model Y SUV, but production delays have pushed back its release.

Analysts believe that this new vehicle could be crucial for Tesla's recovery. Will Rhind, CEO of GraniteShares, noted that if the affordable model turns out to be just a bare-bones version of the Model Y, investor expectations might not be met. He emphasized the importance of meeting both the timeline and the product quality.

Sales have declined significantly, leading to reduced profit margins. Wall Street analysts predict that Tesla's automotive gross margin may have reached its lowest level in the first quarter, a trend likely to continue as the company offers incentives to boost sales.

Tesla has indicated that it plans to use existing platforms and production lines to develop the new vehicle, which should help lower capital costs, but details have been sparse. As demand for Tesla’s current lineup wanes and competition from Chinese EVs intensifies, Musk has shifted focus to robotaxis and artificial intelligence. He has promised driverless ride-hailing services in Texas by June and in California later this year.

However, there are concerns about the safety and legal implications of deploying unproven driverless technology. Tesla is seeking regulatory approvals for its robotaxi service, but production of the anticipated Cybercab has faced hurdles, particularly due to paused component imports from China following tariff increases.

Investor confidence is further shaken by doubts about Musk's commitment to Tesla, given his active role in political matters, which has led to protests and vandalism at Tesla showrooms, negatively impacting brand perception. Sales, especially in California—the company’s largest market—have dropped sharply, contributing to a 40% decline in Tesla's stock this year, which equates to a loss of over $500 billion in market value.

Dennis Dick, chief strategist at Stock Trader Network, believes that if Musk refocuses on restoring Tesla's brand image and minimizes his political commentary, the damage could be mitigated. He urged Musk to concentrate on the company’s self-driving initiatives and robotaxi developments.

Despite a decline in first-quarter deliveries, analysts estimate Tesla's revenue for the period at $21.35 billion, unchanged from the previous year, buoyed by sales of automotive regulatory credits and energy systems. However, the automotive gross margin is projected to drop to 11.83%, down from 13.6% in the fourth quarter, as delivery volume may take precedence over margins, potentially leading to more incentives that could affect profitability.