Deutsche Bank analysts said in a note Thursday that Tesla's (NASDAQ:TSLA) pragmatic approach to cheaper vehicles raises more questions. Investors reacted positively to the news that Tesla is not completely giving up on selling a cheaper consumer model.
The electric vehicle giant's shares rose more than 12% Wednesday following its results and the comments. On Thursday, as of 11:32 am ET, it has gained a further 2.1%.
"The strong positive market reaction to Tesla's mixed Q1 print, in our view represented some relief that Tesla is not completely giving up on selling cheaper consumer models, nor is it staking the company's entire future on Robotaxi," said Deutsche Bank in its research note.
"Tesla promised instead it would utilize a mix of current production lines and aspects of next-gen technology to produce more 'affordable' vehicles at an accelerated pace, as early as in 1H25," added the bank.
The approach is seemingly in response to tough demand conditions for electric vehicles and the need to keep capex in check amid considerable needs for AI/autonomous. Deutsche Bank acknowledged it could be a positive development compared to their previous baseline expectation.
However, the firm said it "leaves large unanswered questions around the detail and cost of the new vehicles and creates considerable execution risk considering the aggressive timeline, as well as risk of Model 3/Y cannibalization if differentiation is small."
"Volume of the more affordable vehicle lineup is also limited by current existing capacity, which may not be enough to move the needle on earnings."