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Tesla’s
investor day served up an example of an old Wall Street adage: Buy the rumor, sell the news.
The event late Wednesday failed to live up to the frenzy of anticipation that preceded it. The company didn’t commit to any new numbers or dates, as other companies typically do on investor days. That wasn’t surprising: Tesla isn’t one for medium-term targets or doing the usual corporate thing. What was disappointing is that it didn’t offer much else to fill the void.
Above all, there was no product. This wasn’t billed as a product event, but much of the hype in the run-up centered on the potential “Model 2”—the $25,000 successor to the Model 3 electric vehicle that is required to sustain Tesla’s rapid growth. The event featured much discussion of the efficiency gains in manufacturing that the company will make on its next-generation production platform, but no hint of what it might actually build: no prototype, illustrative image or timeline.
Nor was there any other meaningful announcement. The “masterplan” Chief Executive
promised was just a high-level elaboration of its longstanding mission to “accelerate the world’s transition to sustainable energy.” The company confirmed reports that it would build its next factory in Mexico. But the real news was that there was no real news. The stock fell about 7% at the open Thursday.
Perhaps the most important element of the event was that it introduced more of Tesla’s management team to investors: Sixteen executives accompanied Mr. Musk on stage for the question-and-answer session. The fact that the CEO wanted to emphasize bench strength suggests he is thinking more seriously about succession now that he has his hands full with Twitter. This might be a double-edged sword: good for the company perhaps, given Mr. Musk’s taste for the kind of controversy a mainstream global auto maker doesn’t need, but possibly bad for the stock, given his cult status among many individual investors.
Net purchases of Tesla stock among this cohort have been off the charts this year—likely one reason the stock has risen 52% in 2023 after last year’s rout. Data provider VandaTrack points out that previous Tesla news events, such as the stock split in 2020 and the partnership with Hertz in 2021, led to elevated buying and share-price jumps followed by selloffs. It expects a similar reversal now.
Waves of retail buying and selling are a good reason for other investors to steer clear of Tesla. The meme-stock vibe leads to high volatility and a valuation that anticipates, at the very least, years of market-share gains at high margins—a heroic assumption in a market awash with new EV entrants.
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Mr. Musk and his team made a convincing case Wednesday that Tesla still has a competitive edge with engineering and manufacturing the new automotive technology. Its clean-sheet approach and rocky financial history have shaped a relentless focus on efficiency that is well suited to the task of driving down EV costs. One innovation it touted Wednesday—reducing the content of expensive silicon-carbide chips in its next generation of vehicles by 75%—reverberated through the semiconductor industry Thursday, with shares in silicon-carbide specialist
down 12% at the open.
But demand for Teslas might not always automatically track fast-increasing supply, as Mr. Musk appears to assume. Tesla’s limited product lineup is aging, and rivals are building up their own brands and manufacturing capacity. Car consumers have long liked variety. The market investors need to watch most closely is China, where Tesla has a formidable peer in
BYD.
When it finally arrives, the Model 2 will have much to live up to.
Write to Stephen Wilmot at stephen.wilmot@wsj.com
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