On April 24, 2025, Tesla’s stock rose 1.9% to $255.54 in early trading, buoyed by optimism surrounding its product lineup expansion in 2025, according to a Barron’s report. However, investors and analysts caution that the electric vehicle maker’s upcoming Model Q—a lower-priced model slated for the first half of 2025—may not suffice to address deeper market challenges, despite Tesla’s promising first-quarter performance.

Disappointing First-Quarter Results Amid High Expectations

Tesla’s first-quarter results have sparked concern among investors, with the stock gaining 1.66% despite what analysts describe as “relatively disappointing” figures. The company reported earnings of $3.12 per share in 2023, while Wall Street estimates had projected nearly $6 per share in late 2022, highlighting a significant shortfall. This gap underscores Tesla’s struggle to meet investor expectations, even as the S&P 500 and Dow Jones Industrial Average climbed 0.8% and 0.1%, respectively, on the same day.

The introduction of the Model Q, alongside the existing Model 2, aims to broaden Tesla’s market reach by targeting lower-priced segments. Yet, skeptics argue that a new model alone cannot address the company’s broader challenges. The average realized price for a Tesla vehicle in the first quarter stood at approximately $39,000 (around €36,300), significantly higher than competitor BYD’s average of $20,000 (approximately €18,600). This price disparity limits Tesla’s ability to penetrate lower-end market segments, where BYD has gained traction, with its stock dipping 1.61% amid competitive pressures.

Market Expansion Requires More Than New Models

Tesla’s current lineup, dominated by the Model 3 and Model Y, fails to address diverse market segments, particularly the lower-end portions critical for global expansion. Building new vehicle lines demands substantial investment in design, parts, and tooling, a process that can strain resources. Future Fund Active ETF co-founder Gary Black noted, “Our view is the more affordable trims [of existing models] will cannibalize higher priced Model Y and Model 3 trims.” He added that if cheaper models align with Tesla’s strategy to resemble the cost reductions seen from 2023 to 2024—when earnings trajectories were funded by over 20% price cuts—Tesla could face margin pressures, with estimates potentially off by more than 50%.

Analysts also highlight Tesla’s need to diversify its addressable market. The Model 3 and Model Y cater to mid- and high-end buyers, leaving gaps in the budget-conscious segment. Stifel analyst Stephen Gengaro acknowledged Tesla’s progress in autonomous driving, stating, “Near-term catalysts include CEO Elon Musk noting that his time allocation to DOGE will likely drop significantly starting in May, the ramp in sales from the new Model Y, lower-priced vehicles hitting the market, and the expected rollout of unsupervised [full-self driving software] in Austin, TX in June.” Gengaro rates Tesla shares as a Buy, trimming his price target by $5 to $450 (€418.50), against an average analyst target of $308 (€286.40), per FactSet.

Regulatory and Industry Implications

Tesla’s plans extend beyond new models, with a driverless taxi service set to launch in Austin, Texas, in June 2025. This move into robotaxis could bolster investor sentiment, but regulatory hurdles remain a concern. Autonomous vehicle deployment requires rigorous safety approvals, and Tesla’s Full-Self Driving software has faced scrutiny for past incidents. Compliance with U.S. federal and state regulations, alongside public acceptance of driverless technology, will be critical to the initiative’s success.

EVXL’s Take

Tesla’s focus on the Model Q and robotaxis signals ambition, but EVXL believes the company must address its pricing strategy to compete effectively with BYD in lower-end markets. While autonomous driving advancements are promising, regulatory challenges and the high cost of new model development could offset gains. Tesla’s ability to balance innovation with affordability will determine whether it can reclaim its growth trajectory—or risk further investor disillusionment.