Tesla Investor Day disappoints with details on affordable new car missing

Tesla Investor Day was short on details for a new, affordable vehicle that will enable the automaker to maintain its rapid growth curve by moving into mainstream segments, disappointing analysts who expected a product presentation.

CEO Elon Musk and Tesla executives spoke on their vision for a global transition to sustainable energy and the need to cut vehicle costs to accelerate EV adoption but left a new-model presentation for another day.

Analysts were hoping to see at least a concept of a $25,000-$30,000 Tesla that could drive sales growth by addressing the mainstream market. The most inexpensive Tesla in the U.S. is the base Model 3 at $44,630 with shipping. Some analysts are informally referring to the coming affordable Tesla as the Model 2.

"Musk's clear path to a sustainable-energy Earth is admirable, but investors may have preferred if Tesla outlined a clear path toward sustainable profits in a high-growth market," said Jessica Caldwell, executive director of insights at Edmunds.

"The emphasis on cost cutting throughout the company was unsurprising yet encouraging given today's economic conditions, but Musk and company failed to put the cherry on top — an actual look at a lower-priced Tesla, if only just conceptually," Caldwell said.

Tesla's stock was down about 6 percent in afternoon trading Thursday.

Musk and Tesla executives at the Wednesday event did provide broad hints about what's coming in a couple years. Tesla will build its third vehicle platform at a new plant in northern Mexico with a focus on affordability.

"Mexico will build our next-generation vehicle, but we'll also be doing that in our other plants, so it's really about getting the model up and running," said Lars Moravy, vice president of engineering. "We expect a huge volume product and we're going to move that quickly over the next couple years."

The new platform Tesla is working on will be for "more than one segment," Moravy said, "and really we're thinking about all the segments that are available that we haven't captured."

Musk has also spoken repeatedly about building an autonomous robotaxi without human controls, but Tesla does not currently have self-driving vehicles.

Analysts wanted to hear more about those products since Musk had hyped Investor Day as a major event.

"There had been much anticipation that Tesla would make a new product announcement, but the company indicated that it will announce its new vehicle at a later date," John Murphy, analyst at Bank of America, said in a research note. "Given the extreme focus on reducing cost and ramping scale, we expect it will be more affordable."

Musk emphasized at the event that shaving costs is critical to Tesla's goal of rapid vehicle sales growth in coming years. Musk has even suggested Tesla could eventually sell 20 million vehicles annually in perhaps a decade.

"Demand for our vehicles in terms of desire to own them may as well be infinite," Musk said Wednesday. "The hard part is building the cars and the entire supply chain that goes with the cars," Musk added. "This is a logistics challenge of extraordinary difficulty."

Musk and company executives outlined some of the steps they are taking to create a low-cost platform, including introducing a new in-house electric motor, adopting new manufacturing techniques and working with suppliers to bring down costs.

Global automakers have long used Mexico as a launching pad for affordable vehicles due to lower labor costs, but the country also now builds luxury models from brands such as Audi and BMW. Vehicles built in Mexico and Canada qualify for the $7,500 U.S. tax credit for EVs. Models built outside North America do not.

Emmanuel Rosner, an analyst at Deutsche Bank, said Tesla's focus on cost and efficiency during the event was admirable, but the lack of detail on the next-generation platform was a letdown.

"Walking away from Tesla's Investor Day, we were admittedly disappointed with the overall lack of details on its next-gen platform, including launch timing, vehicle segments and price points," Rosner said in a research note. "All in, we expect a negative market reaction to the event today."

Tesla executives outlined manufacturing and engineering efficiencies that could cut production costs for the new vehicle platform in half compared to the compact platform used for the Model 3 sedan and Model Y.

Adam Jonas, analyst at Morgan Stanley, said Tesla's focus on slashing costs and scaling up production was the biggest takeaway from Investor Day.

"The non-unveil of Model 2 disappointed some people — but it shouldn't have," Jonas said in a research note.

"From our experience, auto companies don't typically unveil far cheaper and potential better engineered products far in advance" of production, Jonas added. Otherwise, consumers might wait rather than buy current Tesla models.

The lack of details on the new model also means Musk isn't pressured later on when his timeline comes up short. The Tesla Cybertruck, presented in 2019 and promised for 2021, won't start production until later this year. And promises of a fully autonomous Tesla are many years behind schedule.

"Without major news to point to from the three-plus hours of presenting besides a Mexico factory project development announcement, Musk at least didn't get many opportunities to offer new promises he can't keep," Caldwell said. "Maybe that's enough of a win."