Tesla Stock Fell After Wells Fargo Evaluated the Company’s Plan To Produce Cheaper Cars

Tesla Stock

Tesla Stock (NASDAQ:TSLA)

On Friday, Colin Langan, an analyst at Wells Fargo, informed clients that they anticipate Tesla will introduce a cheaper electric vehicle at the company’s investor day on March 1. He did warn that it could be difficult for the carmaker to produce a cheaper vehicle with the high margins that are normal for them. As a result, Tesla stock declined.

On Wednesday, Tesla (NASDAQ:TSLA) will have an investor presentation at its Giga Texas plant, where the “Master Plan 3” will be unveiled. This long-term strategy will likely include the introduction of a third-generation vehicle platform, which would pave the way for introducing a cheaper car priced between $25,000 and $30,000.

Although Langan thinks this is a good idea for growing Tesla’s market share, it needs to be clarified when it may be released or what effect it would have on the company’s margins. On Wednesday, Elon Musk has to address “credible profit/cost objectives and launch date,” as he put it. He also wondered if the corporation could achieve significant cost savings in time to deliver such a cheap car.

He said, “With most of the interior, body and infotainment already simplified, the aims to reach a 20% gross margin aren’t simple.” Our worldwide powertrain estimate benefits from LT raw material contracts and considers TSLA’s hybrid mix of battery chemistries (NCA and LFP). The Model Y we dismantled was likely worth more than $20,000 at the time.

Langan upped his price objective for the Tesla stock from $150 to $190 and kept his Equal-Weight rating.

As for the short-term, we anticipate a little increase in deliveries and, most likely, advantages from increased US EV credits. Zooming out from the investor day, he said, “We see near-term issues surrounding price and possibly increasing US regulation on Autopilot.” There is concern that “TSLA will not have adequate Model 3/Y demand to satisfy the enormous quantity of new capacity in the mid-term.”

On Friday trading, Tesla stock dropped by 3.88%.

Featured Image: Pixabay @ johnjakob

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