Tesla: Next-gen volumes in question if low-cost model scrapped, HSBC says

Investing.com-- Analysts at HSBC said that the potential cancellation of Tesla Inc's (NASDAQ:TSLA) low-cost model presented uncertainties over the firm’s next wave of volume growth, while also questioning the implications of such a move.

Reuters reported last week, citing multiple sources, that Tesla had scrapped development of a low-cost car, amid intense competition in the sector from Chinese electric vehicle makers. The EV maker will instead shift a bulk of its focus towards self-driving and robotaxis.

Tesla CEO Elon Musk denied the Reuters report, and said that the firm will unveil its Robotaxi in early-August. 

But the potential cancellation of the low-cost car sullies the outlook for Tesla’s future volumes, HSBC analysts said.

“If true, this is a big shift in strategy and draws into question future volume growth - "Next Gen" was supposed to support the next wave of growth and was due in late 2025. All of our forecasted 2026 growth (and more) was from this vehicle,” HSBC analysts wrote in a recent note. 

HSBC analysts said that the low-cost car, which has been long touted by Musk, represented 20 percentage points of the brokerage’s 18% volume growth forecast for 2026. Without the model, volume growth will be “slightly down.” 

But HSBC analysts also questioned just why the EV maker could have canceled the low-cost model- specifically whether there was a huge development in Tesla’s full self driving (FSD) efforts to support such a change. 

Tesla announced a heavy pivot into FSD and robotaxis earlier this year, after increased competition in China and lackluster demand saw the EV maker clock its first quarterly decline in deliveries in nearly four years. Analysts had flagged more difficulty for the EV maker as global EV demand also appeared to be cooling. 

Tesla has consistently struggled with its FSD efforts- the automaker is the subject of numerous lawsuits and investigations over crashes involving its autopilot and FSD systems. 

The EV maker is also yet to prove it can produce an autonomous vehicle despite repeated promises by Musk.