Where is the cheap electric vehicle and other questions investors want answered

Tesla (TSLA) reports third-quarter results after the bell on Wednesday, with investors seeking clarity on the electric vehicle maker's long-awaited lower-cost electric vehicles, details on its robotaxi rollout and other initiatives such as AI and robotics.

Tesla shares have fallen about 9% since Tesla unveiled its robot taxi called Cybercab at its flashy “We, Robot” event on Oct. 10 at Warner Bros.'s studio lot in Burbank, California.

For the third quarter, Tesla is expected to report revenue of $25.42 billion, according to Bloomberg consensus. That's more than the $25.05 billion reported in the second quarter and also exceeds the $23.40 billion Tesla reported a year ago. According to Bloomberg, The Street expects Tesla to report adjusted earnings per share of $0.51, adjusted net income of $2.06 billion and operating income of $1.96 billion.

Earlier this month, Tesla (TSLA) announced third-quarter deliveries that fell slightly short of expectations, causing the stock to decline.

Tesla said it delivered 462,890 vehicles in the third quarter, up 6.4% from the previous quarter, marking the first quarter of delivery growth this year. The numbers were also higher than the 435,059 electric vehicles the company delivered in the same period last year. However, according to Bloomberg, Wall Street had expected Tesla to be closer to 463,897.

Many analysts and industry observers believe that the debut and release of a cheaper electric vehicle will push electric vehicle sales into the next round, as even CEO Elon Musk has said before. In their Q2 report, Tesla and Musk said the company remains on track to produce new vehicles, likely including a cheaper electric vehicle, in the first half of next year.

Investors and analysts wanted more details about Tesla's “We, Robot” event on the Cybercab itself and detailed test plans and questions about the development of Tesla's sub-$30,000 electric vehicle called the Model 2.

“Overall, we found Tesla’s robotaxi event to be underwhelming and surprisingly lacking in detail,” Bernstein analyst Toni Sacconaghi wrote the day after the event. “While Musk expressed his vision of an autonomous world, it offered little more than what he had repeatedly expressed in recent years.”

Sacconaghi complained that details on new product offerings such as the autonomous Cybercab and Robovan vans and timelines were missing. The analyst also believed that Tesla would find it difficult to overtake other robotaxi competitors such as Waymo and Cruise due to regulatory and technical reasons. Additionally, the lack of any detail or even a rendering of the Model 2 was also a disappointment.

Tesla may show a representation of this cheaper electric vehicle in its third quarter shareholder presentation rather than actually showing it to investors and the public at an event (or announcing another launch event in the near future).

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Expect Musk and Tesla executives to be questioned extensively in the cybercab for new details and updates on the Model 2.

“While many investors obviously left Robotaxi Day wanting more details on Tesla's broader autonomy and AI strategy, we would expect Musk to discuss some of the timelines/specifics surrounding his FSD and Cybercab on this week's conference call. Wedbush analyst Dan Ives wrote in a note to investors on Monday.

As for Tesla's other activities, further details on software and improvements for full self-driving (FSD) will be the focus; Tesla is facing an NHTSA investigation into its self-driving software due to accidents in poor visibility conditions. With a camera-only system like FSD, issues with the camera detecting terrain and other road objects are a concern.

And while Tesla's Optimus robot was on full display at the Robotaxi event, its functionality was limited, and it was later decided that the robots would be controlled by human operators. Musk said at the event that Optimus could be Tesla's best-selling product of all time.

Aside from the robots, the real driver for Tesla stock is car sales in the current quarters and whether Tesla expects deliveries to increase next year.

“While autonomy, FSD and robotics are the future for Tesla, near-term deliveries will drive the stock and the stock market will focus on Q3, showing an inflection point between margin and demand in Tesla's history through 2025,” Ives said.

Pras Subramanian is a reporter for Yahoo Finance. You can keep following him X and further Instagram.

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