There was no $25,000 electric car this time. Tesla Inc's (NASDAQ:TSLA) long-promised budget model has been shelved, replaced instead by cheaper versions of its existing Model 3 and Model Y.
At roughly $37,000 and $40,000 respectively, they are more affordable than before, though only by about $5,000, and still dearer than many rivals. Production started in June, with cars expected to reach buyers by the end of the year.
Wedbush calls the move a “first step” in getting Tesla back to a 500,000-a-quarter delivery rate, the kind of volume needed to reinvigorate demand as tax incentives for electric vehicles fade.
Even so, the analysts admit to being “relatively disappointed” with pricing, which remains close to previous levels once tax credits are stripped out.
The bigger story, in their view, is software. Alongside the new cars came Full Self-Driving (FSD) version 14.1, Tesla’s first major update in almost a year.
It adds features such as automatic parking, emergency vehicle detection and smarter lane changes, powered by what the company claims is a tenfold increase in the size of its neural network, the complex web of algorithms that helps the car make driving decisions.
In plain English, that means the car should handle more real-world quirks, from road debris to detours, with fewer interventions from the driver.
Wedbush believes this is the start of Tesla’s “march to an AI-driven valuation”, with autonomy and the long-awaited Cybercab ride-hailing service representing “the golden goose for Musk & Co”.
The firm’s bull-case valuation stretches to $3 trillion by the end of 2026, although for now it keeps a more grounded 12-month price target of $600 and an “outperform” rating, implying confidence that the shares can rise from their current $453.
Whether investors share that faith may depend on execution. Any production snags at Tesla’s factories in California or Shanghai could dent growth, while affordability remains a nagging issue as competition intensifies.
But the company is doubling down on what has always set it apart: the promise that its cars will one day drive themselves. For better or worse, that is now where Tesla’s future – and its valuation – appear to lie.