TLDR
- Tesla stock fell 0.6% in premarket trading to $340.80 as the company prepares for its June robotaxi service launch in Austin, Texas
- Some Tesla executives were concerned last year when Elon Musk publicly denied killing the $25,000 Model 2 project despite having already canceled it internally
- Tesla is now working on stripped-down versions of the Model 3 and Model Y instead of an all-new affordable vehicle, set to roll out in the first half of 2025
- Morgan Stanley analyst Adam Jonas rates Tesla stock as Buy with a $410 price target, with only $75 coming from the core auto business
- Tesla posted its first annual vehicle sales decline in 2024 and sales were down 13% in the first quarter of 2025
Tesla stock dipped 0.6% in premarket trading Tuesday to $340.80 as investors focus on the company’s upcoming robotaxi launch in Austin, Texas. The stock fell 1.1% on Monday, the first trading day of June.
The electric vehicle maker is set to launch its AI-trained driverless taxi service within days. Elon Musk has described this as one of Tesla’s most important milestones since the Model 3 launch in 2017 and Model Y debut in 2020.
Those vehicles brought electric cars to mainstream buyers and drove Tesla’s sales growth. Investors hope the robotaxi service will have a similar impact on the company’s future.
Tesla’s driver assistance software is advanced but still requires driver attention. The robotaxi service will change this by operating without human drivers.
The initial rollout will be limited to a handful of cars picking up paying passengers. Musk believes any relatively new Tesla could eventually serve as a robotaxi.
This would create a fleet of millions of vehicles across multiple states. The scale represents a major shift in Tesla’s business model.
Regulatory Hurdles Ahead
Morgan Stanley analyst Adam Jonas warns that technology will develop faster than regulatory policies. State-by-state autonomous vehicle regulations remain inconsistent across the country.
Transportation Secretary Sean Duffy has called for national standards, but none exist yet. This regulatory gap could slow Tesla’s robotaxi expansion plans.
Jonas compares AI development to nuclear proliferation in terms of regulatory complexity. He believes robust frameworks are needed to balance innovation with safety concerns.
The analyst maintains a Buy rating on Tesla with a $410 price target. Only $75 of that target comes from Tesla’s traditional auto business, with the rest tied to AI applications.
Tesla’s stock performance shows mixed results this year. Shares are down about 15% year-to-date but up 92% over the past 12 months.
Affordable EV Controversy
Behind the scenes, Tesla executives raised concerns about Musk’s public statements regarding affordable vehicles. Some were alarmed when Musk denied a Reuters report about killing the planned $25,000 Model 2 in April 2024.
Musk posted “Reuters is lying” on X within minutes of the story’s publication. This helped Tesla’s stock recover from a 6% decline that day.
However, Tesla executives knew the low-cost vehicle project had been canceled weeks earlier. The company had already told employees the Model 2 was dead.
Elon Musk Confirms Tesla’s New Low-Cost, High-Volume Model 2 on Munro Live. #Tesla #Model2 #TeslaModel2 #TeslaCars https://t.co/aeIfQsaT2u
— Tesla Motors Community (@CommunityTesla) December 5, 2023
Senior managers were confused by Musk’s denial and asked if he’d changed his mind. Musk confirmed the project remained canceled despite his public statement.
Some executives worried the denial could mislead investors about Tesla’s product plans. They expressed concerns about potential SEC enforcement issues.
Current Affordable Vehicle Plans
Instead of the all-new Model 2, Tesla is developing stripped-down versions of existing models. These will be based on the Model 3 sedan and Model Y SUV platforms.
Engineering chief Lars Moravy said these affordable models would “resemble in form and shape the cars we already make.” He emphasized they would be affordable and available for purchase.
The vehicles are scheduled to roll out in the first half of 2025, though they have faced delays. Tesla has not announced pricing for these models.
Gary Black, a Tesla investor who manages the Future Fund LLC, recently sold his $1.2 million Tesla position. He cited concerns that the affordable vehicle would be a “stripped down Model Y” rather than a differentiated product.
Tesla’s sales have struggled recently with the company posting its first annual vehicle sales decline in 2024. First quarter 2025 sales dropped 13% as competition increased.
Chinese automaker BYD outsold Tesla in Europe for the first time in April 2025. BYD’s entry-level Seagull electric hatchback costs less than $10,000 in China.
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