A robotaxi isn't enough to fix Tesla's problems, analyst says. Here's what Elon Musk needs to do.

  • Wedbush analysts said Tesla pushing off a cheaper EV in favor of robotaxis would be "a debacle."

  • Reuters reported Tesla halted the development of its affordable EV to focus on a robotaxi.

  • Wedbush believes full autonomy won't be reached until 2030, making an affordable Tesla "crucial."

The robotaxi that Tesla CEO Elon Musk teased would be revealed by the end of the year is not what the company needs to focus on in the short-term, according to one prominent analyst firm.

Instead, it is "crucial" that Tesla delivers a sub-$30,000 car in the next 18 months, Wedbush analysts wrote in a note published Thursday.

The analysts said while an upcoming Tesla robotaxi reveal is an exciting announcement, full autonomy isn't expected until 2030.

"If robotaxis is viewed as the 'magic model' to replace Model 2 we would view this as a debacle negative for the Tesla story," the analyst note said. "It would be a risky gamble if Tesla moved away from the Model 2 and went straight to robotaxis."

The Wedbush letter comes after Reuters reported on April 5 that Tesla was holding off on developing the $25,000 electric vehicle to put more resources toward self-driving cars. The report cited internal company messages and sources familiar with the situation.

Musk responded to the report, saying "Reuters is lying (again)" in a post on X, formerly Twitter.

Later on April 5, Musk posted on X that Tesla will unveil its robotaxi on August 8.

The possible reveal date comes after years of Musk discussing how Tesla's self-driving software, which currently requires an attentive driver at all times, could eventually make its cars more valuable if owners could generate money by providing fully autonomous rides for others when not personally using their vehicles.

Musk has long focused on self-driving cars

Musk said in a 2022 interview that Tesla's "overwhelming focus" is solving fully autonomous driving.

"It's really the difference between Tesla being worth a lot of money or worth basically zero," Musk said in the interview.

The Tesla CEO has said new cars quickly lose value and car companies make money on selling existing fleets.

Tesla's Full Self-Driving software beta, or FSD, is currently classified as "level two" in an industry standard that goes up to six. The software still requires full human supervision. Numerous crashes involving Teslas have led to scrutiny from safety regulators and lawsuits.

Other automakers are also exploring fully autonomous driving.

Apple was famously rumored to be designing such a vehicle, before it reportedly decided to fully scrap the project amid continued delays and technological constraints.

Driverless cars aren't being sold on the market yet. But Waymo is testing self-driving models in Los Angeles and parts of the Bay Area, although it issued software recalls in February after two of its vehicles, which didn't have passengers at the time, crashed into the same towed pickup truck.

GM's Cruise, which had halted its autonomous vehicles, is also getting back to testing its vehicles in Phoenix — but with human drivers for now. The company lost its license in California in October after one of its vehicles ran over and dragged a pedestrian who the company says was first struck by another vehicle.

Meanwhile, a number of Chinese tech companies like Baidu and Didi have quietly stopped testing self-driving cars on the road after mounting pressure from lawmakers and public criticism about safety issues.

Musk has also talked up the value of a more affordable Tesla

Musk has also touted the importance of a cheaper Tesla model for years.

"This has always been our dream, from the beginning of the company," Musk said during Tesla's "Battery Day" presentation in 2020.

As the lack of low-cost options turns some customers off from making the switch to EV vehicles, Tesla has experienced decreased demand. The company has tried to cut prices multiple times to better compete with companies like BYD.

It recently announced its quarterly deliveries had fallen significantly short of Wall Street's lowest expectations, clocking the company's first year-over-year quarterly decline since 2020.

"For Musk, this is a fork in the road time to get Tesla through this turbulent period otherwise dark days could be ahead," Wedbush analysts wrote in the letter.

With the ongoing issues surrounding Tesla's margins and demand, the analysts said Musk needs to "regain confidence in the eyes of the Street."

Former Tesla CEO and cofounder Martin Eberhard also weighed in on the Reuters report of Tesla's scrapped Model 2 earlier this week, saying it would be a "shame" if the company dropped it.

Eberhard also said it could benefit China, which has gained market share against Tesla thanks to its affordable electric cars.

Read the original article on Business Insider