Tesla Announcement: Stock Markets Await Mysterious Launch
Tesla stock popped after the company released a pair of teasers on X promising an announcement on Tuesday, Oct. 7.
One post showed the headlights of a vehicle with swirling smoke. Another post showed a fan or wheel with the Tesla logo spinning in the center. Odds are that Tesla will unveil its lower-priced vehicle that it has been promising for years.
Tesla could use a new model right now. Vehicle sales declined globally in 2024 and are on pace for another decline in 2025. Sales in China, which grew last year, are on pace for their first annual decline ever. A new model might help arrest the slide, opening up new portions of the auto market not served by the Model S, X, 3, Y, and Cybertruck.
The only problem is the new vehicle might just be a stripped-down Model Y. That’s what CEO Elon Musk hinted at on Tesla’s second-quarter earnings conference call.
That’s a risk. A car the same size and shape as the existing Y could steal sales from higher-priced models.
Musk hinted that the new model would come after the expiration of the $7,500 federal EV purchase tax credit, which was eliminated at the end of September as part of President Trump’s tax and spending bill.
Losing the credit is a significant headwind for Tesla and the industry. The average transaction price of a new EV, before any credit, is about $57,000, according to automotive data provider Kelly Blue Book. The average transaction price of a traditional car is closer to $49,000. EVs need to get a lot cheaper or they risk a sales disaster in the fourth quarter.
EVs typically account for about 8% to 10% of new-car sales in the U.S.
A nicely equipped Model Y starts at about $49,000 today. If the lower-priced version starts under $40,000, that would be impressive.
Investors can compare the features and range of the lower-priced vehicle to the Y to estimate the profitability of the new model. Tesla produced an automotive gross profit margin excluding the benefits of any regulatory credit sales of about 15% in the second quarter, down from a peak margin of 30% reported in the second quarter of 2022.
Average selling prices were higher back then, interest rates were lower, and Tesla represented a larger share of the overall market. The EV maker had an easier time pricing and selling all the vehicles it could make.
Now it needs new models to juice sales.