Tesla stock shaky after new model denial

Well, that didn’t take long.

Tesla China denied a report this week that said the electric vehicle company is developing a new, smaller SUV model to be produced at its Shanghai factory. Tesla China says “market information claiming that Tesla is developing a new, smaller, and cheaper electric SUV is inaccurate,” Electrek reported, citing the Chinese financial wire Cailian Press.

On Thursday, April 9, Reuters reported that Tesla is developing a new electric SUV and has contacted suppliers about manufacturing logistics and specifications for various components.

The vehicle was supposed to be more than 18 inches shorter in length than Tesla’s current Model Y SUV (14 ft vs 15.7 ft) and was to be cheaper than the Model Y, which currently has an MSRP of $39,990 for the lowest-tier model.

The vehicle would be produced in China, according to four Reuters sources familiar with the discussions, with future plans to expand production to the U.S. and Europe. Tesla’s Shanghai factory, which exports to Europe and other markets, saw production rise by nearly 9% year over year to 85,670 in the first quarter.

Either Reuters sources were wrong, or Tesla wasn’t ready for this information to become public, because the company has denied the report.

The denial has Tesla’s stock going on a rollercoaster ride Friday morning, April 10, with shares dipping as low as $345.59 shortly after the opening bell, though the stock was up 0.14% to $346.06 at last check.

Investors may have been keen on a new model after the company shared it was mothballing its Model S and Model X due to a lack of demand. The Model 3 was the smaller, cheaper version of the Model S, and its widespread adoption after its July 2017 debut helped propel Tesla deliveries (and shares) to the levels they enjoy now.

Tesla’s stock has fallen 4.5% over the past five days, 13.28% over the past month, and more than 16% over the past six months. Year to date, shares are down nearly 21%.

When Tesla confirmed it was ending production of the Model 3 and Model X, it said it would refocus its efforts on humanoid robots and driverless cars. However, according to Reuters sources, Tesla also realizes that “global markets won’t see meaningful adoption — nor regulatory acceptance — of driverless vehicles for years.”

So developing a new vehicle would seem to run counter to that messaging.

However, as much as Tesla likes to say it is not just a car company, more than 70% of its revenue ($69.5 billion in 2025) comes from automotive sales, which includes leasing, regulatory credits, and vehicle sales.

Service revenue from its vehicles (including supercharging, vehicle insurance, and repairs) totaled another $12.7 billion.

Auto sales already aren’t a high-margin business, and its automotive gross margin (excluding regulatory credits) actually dipped into the red for the first time in 2025, according to Reuters.

Earlier this year, Tesla indicated it was pulling the plug on the Model S and Model X and would replace that production capacity with Optimus humanoid robots as part of the company’s plan to build 1 million of them per year.

That plan may worry investors, since there is currently no discernible market for humanoid robots, and selling 10,000 of them in a year would be impressive. But the vehicle models the company is getting rid of haven’t sold, either, so it may be a wash in the end.

However, analysts at BNP Paribas aren’t taking this Tesla experiment lightly, since the company is also spending heavily to make it happen.

“Given Tesla’s sizable cash burn this year ($7 billion estimate by BNPP) and indications for massive multi-year investments on the horizon tied to a TeraFab and 100 GW solar capacity, the ‘stakes’ of TSLA’s demonstrated robotaxi and Optimus progress could not be higher,” analysts said in a recent note.

According to BNP, the other models that combined for 16,000 vehicles in the quarter benefited from artificially inflated demand, so, once again, moving off of them makes sense. Still, Musk has made some pretty big promises about what Optimus and Robotaxi can do, and the firm says it’s time for Tesla to “put up or shut up” in 2026.

“We view 1Q26’s deliveries — modestly below consensus — as yet another input to the TSLA stock’s challenged setup for this year, with EGS storage deployments also meaningfully light,” BNP analysts said.

“A critical factor to this year is the Co.’s progress rate in its active Robotaxi fleet, which is climbing yet still limited to just two cities. The core catalysts for TSLA center on its ability to show meaningful progress toward its AI-defined future, inclusive of Robotaxi fleet expansion (targeting seven new cities in 1H26) and commercialized production of Optimus by year-end.”

BNP reiterated its underperform rating and $280 price target on Tesla shares, representing a potential 22% downside from the stock’s current level.

Related: Tesla finally makes move fans, and investors, have been waiting for

This story was originally published by TheStreet on Apr 10, 2026, where it first appeared in the Automotive section. Add TheStreet as a Preferred Source by clicking here.