Home Stock & Shares Tesla Share Price Drops 10% On Damp Squib Product Launch

Tesla Share Price Drops 10% On Damp Squib Product Launch

by Jonathan Adams
Tesla

The Tesla share price took an over 10% hit yesterday, with the electric carmaker’s valuation dropping by $28 billion after a hyped-up product launch turned out to be an over-sell. Tesla CEO Elon Musk has never been one to underplay his hand but he took the ‘over promise, under deliver’, approach too far this time after boasting Tuesday night’s product launch even would be “insane”. He promised their minds would be “blown” by “exciting things”.

Tesla investors and tech fans alike were understandably enthused to find out what “exciting things” would be revealed. The anticipation successfully built up nicely by Mr Musk, he suddenly started backtracking on Monday evening, playing Tuesday’s event down.

In keeping with his modus operandi, Musk took to Twitter. His Tweet cautioned that, in fact, minds may not be blown after all and “what we announce will not reach serious high-volume production until 2022” due to the “extreme difficulty of scaling production of new technology”.

That popping of the bubble of excitement he’d himself blown up until the rubber was straining was enough to send Tesla’s share price down 5.6% on Tuesday ahead of an event by then lacking much anticipation. After the damp squib of a launch even, another 10.3% was wiped off the company’s value during trading yesterday, taking the total drop to $50 billion in the aftermath of Monday night’s Tweet.

In the end, all that was unveiled at Tuesday’s even was Tesla’s ambition to cut the cost of an entry-level Tesla to $25,000 (circa. £20,000) within three years, with costs reduced by a new generation of batteries that will improve range and power. And Tesla will manufacture these batteries in-house, buying raw materials, including lithium, directly.

The entry-level cost of a Tesla, the cheapest Model 3 currently comes in at £40,500, being chopped in half would be great and undoubtedly hugely boost the company’s sales. But with the current status of the technology’s development ‘in progress’, mass production still in the planning stage, and 3 years from now the earliest possible moment the ambition might become a reality, investors were clearly not overly excited.

Musk is, however, seemingly determined to bring the entry level price of a Tesla down to a genuinely mass market level, which would inevitably be hugely positive for future sales if achieved. He said:

“One of the things that troubles me the most is that we don’t yet have a truly affordable car, and that is something that we will make in the future. But in order to do that, we’ve got to get the cost of batteries down.”

Despite Tesla’s recent slide in share price, it is still currently the most valuable car manufacturer in the world, despite revenues and profits that are a fraction of the traditional big names in automaking. The valuation is very much based on future potential as an industry ‘disrupter’, which will take off when it can offer practical electric vehicles at the same or similar price points as inexpensive petrol-engine cars. It’s good to know Tesla is working towards that goal but Mr Musk may want to tone down the rhetoric in future, until he’s sure he has something that really will “blow” minds to unveil.

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