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(Reuters) - Tesla investors will look for more details on the automaker's lower-priced model when it reports quarterly results on Wednesday as some expect the cheaper car to help the company hit its goal to increase deliveries by up to 30% this year.
The world's most valuable automaker has seen its stock market valuation soar more than 60% to $1.3 trillion since President Donald Trump won November's election with the financial backing of Tesla CEO Elon Musk. Investors are betting the new administration will ease regulation on self-driving vehicle systems that Tesla is developing.
Faced with intense competition in China from BYD and other electric vehicle makers, Tesla in 2024 recorded its first-ever decline in annual deliveries. Analysts now expect lower borrowing costs this year to fuel a rebound in sales volume.
Tesla, however, is yet to deliver major upgrades to its aging line up of cars in the U.S., and it is relying on its relatively new Cybertruck electric pickup truck, with its polarizing design, to boost sales. The company launched an updated version of its best-seller Model Y crossover SUV on Thursday, weeks after its launch in China to attract new customers.
"As the opportunity for growth from Tesla's existing lineup appears quite limited, Tesla's new low-cost model remains crucial to Tesla's plan for growth, even if not to the extent of the prior 20-30% y/y target," Barclays analyst Dan Levy said in a research note.
Tesla said in April last year that it would launch cheaper cars based on its current platforms and their existing production lines in the first half of 2025, as part of a pivot from ambitious plans to produce an all-new model that had been expected to cost $25,000.
Some investors are concerned that the new model may not qualify for federal subsidies under the Inflation Reduction Act. However, Reuters late last year reported that these Biden-era subsidies are likely to be removed under the Trump administration, a move endorsed by CEO Musk.
"It is unclear whether the new model will qualify for a $7,500 U.S. rebate, which could make the net cost to consumers higher, and we don't know how different the new offering might be, and whether it might cannibalize existing Model Y sales," said David Wagner, portfolio manager at Tesla investor Aptus Capital Advisors.
Following its sharp stock gains, Tesla is trading at 125 times expected earnings, reflecting shareholders' perception of it as a high-growth tech company with a future in AI and robots, according to LSEG data. By comparison, General Motors is valued at five times its earnings.