Tesla Investors Hope Cheaper EV Model Boosts Growth in 2025

Tesla investors are eagerly awaiting details about the company’s new, lower-priced electric vehicle (EV) when it releases its quarterly results this Wednesday. Many believe that this new model will help Tesla reach its goal of increasing car deliveries by up to 30% this year, especially after a slower 2024.

Tesla’s stock has gone up more than 60% since the November election, boosting its value to $1.3 trillion. This increase has been supported by CEO Elon Musk’s financial backing and hopes that new government policies might benefit the company, especially in self-driving car technology.

However, despite the rising stock price, Tesla faced its first-ever drop in annual deliveries in 2024, partly due to tougher competition in China from companies like BYD. Now, analysts are expecting sales to bounce back thanks to lower borrowing costs, though Tesla is still dealing with an older lineup of cars in the U.S.

To overcome this, Tesla is counting on new vehicles like the Cybertruck, a fully electric pickup, and an updated version of its popular Model Y crossover SUV, which was recently launched in China. But the big focus is on Tesla’s new lower-cost model, which the company plans to release in 2025. This model will be based on Tesla’s current car designs and production lines, a change from its earlier plans for a completely new $25,000 vehicle.

While the new car is expected to help Tesla grow, some investors have concerns. One worry is whether the new model will qualify for government incentives, like the $7,500 rebate under the Inflation Reduction Act, which could affect its price.

“There’s uncertainty about whether this new model will get the rebate, which could increase its cost for buyers,” said David Wagner, an investor at Aptus Capital Advisors. Some are also wondering if the new model will hurt sales of Tesla’s other popular car, the Model Y.

Tesla’s stock is currently valued much higher than traditional automakers. Its price-to-earnings (P/E) ratio is 125, which means investors see Tesla as a high-growth tech company, similar to big tech companies like Microsoft and Google. In comparison, General Motors’ P/E ratio is only 5. Analysts expect Tesla to sell about 2.1 million cars in 2025, which would be a 16% increase from last year, after a small dip in sales due to competition and an older vehicle lineup.

Tesla’s Full Self-Driving (FSD) system is also helping the company stay profitable. FSD, which adds advanced features to Tesla cars, is contributing to higher profit margins. Even with some competition in China from cheaper electric vehicles, Tesla’s focus on AI technology and projects like robotaxis could continue to fuel its growth.

Tesla’s lower-cost model and its continued advancements in self-driving tech are expected to play a big part in the company’s performance in 2025. Investors are hoping these changes will help Tesla maintain its growth and stay competitive in the fast-evolving electric vehicle market.

Also Read: Tesla Reports First Annual EV Sales Drop in Over a Decade Due to Market Challenges