Is Tesla's stock price finally getting a boost? It is expected to mass-produce a new model, Redwood, by mid-2025.

Zhitong App learned that, according to media reports citing informed sources, global electric vehicle leader Tesla has informed many suppliers that it hopes to start mass production of a new electric vehicle codenamed "Redwood" for the mass market by mid-2025. Two informed sources referred to this new model as a compact crossover. This latest news may boost Tesla's stock price, which has been weak since 2024. Under the pressure of weak global demand for electric vehicles, Tesla's stock price has been declining since 2024, with a decline of over 15% so far. In contrast, the benchmark S&P 500 index has reached new highs, with a year-to-date increase of over 2%.

For a long time, Tesla CEO Elon Musk has been stimulating the interest of Tesla model fans and Tesla stock investors in reasonably priced electric vehicles and autonomous taxis. These new models are expected to be produced on Tesla's next-generation, more affordable electric vehicle platform.

According to media reports, these models include an entry-level model priced at $25,000, which will allow it to compete with cheaper gasoline-powered cars and an increasing number of affordable electric vehicle models, such as those produced by China's BYD. Statistics show that BYD replaced Tesla as the world's largest electric vehicle manufacturer in the last quarter of 2023.

It is understood that Tesla CEO Musk initially promised to produce a new electric vehicle worth about $25,000 in 2020, but later shelved the plan and recently resumed it. Tesla's cheapest model, the Model 3 sedan, currently starts at $38,990 in the United States.

Musk has repeatedly expressed concern about high interest rates affecting consumer demand for large items such as electric vehicles. "I am concerned about the high interest rate environment we are in." "What I want to emphasize is that most people buy cars on a monthly payment basis. If interest rates remain high for a long time, or even higher, demand will certainly weaken." Musk said at a Tesla earnings conference.

Will the rumors about the new "compact crossover" ignite Tesla's stock price?

Under the pressure of weak global demand for electric vehicles, Tesla's stock price has been declining since 2024, with a decline of over 15% so far, forming a sharp contrast with the stock price trends of the other six giants among the Magnificent Seven in the US stock market. The Magnificent Seven in the US tech market include Apple, Microsoft, Google, Tesla, NVIDIA, Amazon, and Meta Platforms.

In contrast, AI chip leader NVIDIA has seen a rise of up to 20%, Microsoft's stock price has increased by 6%, and even Apple, whose stock price was hit hard earlier this year, has rebounded significantly, achieving a nearly 2% increase year-to-date. Meanwhile, the benchmark S&P 500 index has reached new highs, with a year-to-date increase of over 2%.Wall Street analysts' overall view of Tesla is rapidly deteriorating, mainly due to the increasingly significant signs of slowing growth in electric vehicle sales under high interest rate pressure. In addition, the incentives from governments around the world are gradually drying up, and the cheap electric vehicle models produced by Chinese competitor BYD pose a serious threat to Tesla's absolute leadership position in the electric vehicle field.

Although Tesla delivered a record number of electric vehicles in the fourth quarter, exceeding market expectations and achieving its 2023 delivery target, it lost the title of the largest electric vehicle manufacturer in terms of total sales to Chinese competitor BYD. Data shows that Tesla delivered 484,507 electric vehicles from October to December, lower than the 526,409 vehicles delivered by BYD during the same period, supported by Warren Buffett.

Data compiled by institutions shows that over the past year, Wall Street analysts' general profit expectations for Tesla in the next 12 months have declined by more than 20%, while the overall profit expectations for the S&P 500 Index have increased by 6% during the same period. The consensus analyst rating score for this electric vehicle manufacturer is close to its lowest level in two years.

Statistics from Seeking Alpha show that Tesla's analyst rating score continues to decline, largely reflecting Wall Street's concerns about the profit prospects of this electric vehicle leader. Currently, Tesla's Analyst Ratings are only 3.42 (out of 5, compared to scores close to 5 for NVIDIA and Microsoft), indicating that more and more analysts are downgrading Tesla's rating from "buy" to "hold" or "sell".

In terms of stock ratings and price target expectations, data compiled by Seeking Alpha shows that Wall Street analysts have changed their consensus rating for Tesla from "buy" to "hold", and the average target price has fallen to $236.13, with the lowest target price being only $85.

According to media reports, two insiders have revealed that Tesla issued a "request for quotation" or "Redwood" bid invitation to suppliers for a new model, with an expected weekly production volume of 10,000 vehicles. These insiders stated that Tesla's production plan is tentatively scheduled to start in June 2025. Some bullish analysts believe that the rumors of mass production of this new "compact crossover vehicle" could be one of the few positive catalysts for Tesla's stock price in the short term. Another potential positive catalyst could be an earnings report that exceeds expectations (to be announced after market close on January 24, Eastern Time). However, if the core financial data falls short of expectations, another round of selling may await Tesla investors.

Tesla has not responded to media requests for comment regarding the latest reports.

Prior to the release of Tesla's quarterly earnings report on Wednesday afternoon, the timing of the launch of the new generation compact car was one of the most voted questions by investors. Tesla expects delivery volume to grow by 21% in 2024, far below the long-term annual delivery target of 50% set by Musk about three years ago.

Musk previously stated in May 2023 that Tesla is developing two new models, with a total annual sales volume potentially reaching 5 million vehicles. He said at Tesla's annual shareholder meeting, "The design and manufacturing technology of our products far surpasses any other product in the industry."

In the official biography of Musk released by Walter Isaacson in September, it was revealed that Tesla plans to produce a low-cost autonomous taxi and an entry-level electric vehicle priced at $25,000 on the same vehicle architecture. The book also includes interviews with Musk and his executives.

As early as 2022, Musk stated that Tesla will launch a futuristic dedicated autonomous taxi in 2024, but Tesla has failed multiple times to achieve its goal of full autonomous driving capability.

In March last year, he and other Tesla executives formulated a plan to halve the cost of manufacturing the next generation of vehicles, but did not provide a specific timeline.

Tesla's "hard fight" for affordable models? Willing to dismantle Civic to study affordability essence

Tesla has a track record of not meeting its targets in terms of product releases and pricing, and achieving larger sales volumes in the context of sluggish global demand for electric vehicles will require more time.

For example, the production plan for the Tesla Cybertruck has been repeatedly delayed and is progressing slowly, with a starting price of $60,990 in the US market, which is 50% higher than the price Musk boasted about in 2019.

"They have been overly optimistic about the release expectations for most new products. It is not ruled out that mass production is more likely to start in 2026," said one insider. Musk previously stated that this affordable new electric vehicle model will initially be produced at Tesla's factory in Texas.Considering the cost of electric vehicle batteries and the traditional challenges faced in producing high-quality affordable cars, achieving significant profits from affordable electric vehicles will be a challenge.

According to media reports, two insiders have revealed that Tesla's vehicle development team has even dismantled a Honda model, specifically the popular Civic, to study how to produce cheaper cars. It is understood that the starting price of the Civic in the United States is $23,950.

The insiders also disclosed that Tesla's next-generation architecture, temporarily referred to as "NV9X" within the company, will include two or more vehicle models.

Earlier reports have stated that Tesla plans to produce cheaper cars at a factory near Berlin, Germany, and is interested in establishing a factory in India to produce a new affordable electric vehicle model. This global leader in electric vehicles already has large manufacturing facilities in Shanghai and Fremont, California.