Tesla’s ambitious growth targets for 2025 are facing scrutiny from a prominent investor. Gary Black, Managing Partner of The Future Fund LLC, contends that Tesla Inc. (TSLA) needs more than just price reductions to achieve its projected 20-30% volume increase. He argues that relying on cheaper versions of existing models, like the Model 3 and Model Y, won’t cut it in an increasingly competitive EV market. Black’s assessment follows Tesla’s recent third-quarter earnings report, where the company reported an 8% year-over-year revenue increase to $25.18 billion—a figure that fell short of analyst expectations.
Black, in a post on X (formerly Twitter), emphasizes the limitations of Tesla’s 2022-2023 price reduction strategy. He asserts that this approach alone is inadequate for sustaining substantial growth. Instead, he proposes that Tesla needs to diversify its product offerings by introducing entirely new vehicle form factors to tap into previously unexplored market segments. He specifically suggests potential models such as a four-seat Cybercab, which could target commercial users and the growing autonomous ride-sharing market, and a Model 3 hatchback to compete in the significant compact car segment, estimated to hold 12-15% of the global market share.
Black’s analysis raises important questions about Tesla’s long-term strategy. It challenges the company’s stated commitment to launching more affordable vehicles in the first half of 2025, a plan CEO Elon Musk has directly linked to the projected 20-30% annual volume growth. Black highlights a critical need for an interim solution to bridge the gap before the anticipated full rollout of autonomous Cybercab technology in 2026. He suggests that this solution must involve new vehicle categories capable of attracting buyers in diverse market segments, rather than solely relying on price adjustments to existing models.
The intensified competition within the electric vehicle market adds another layer of complexity to Tesla’s challenge. Tesla faces pressure from both established U.S. automakers and rapidly expanding Chinese manufacturers. While Tesla’s third-quarter operating margin of 10.8% and a record-low cost of goods sold per vehicle at $35,100 showcase the company’s efforts in maintaining profitability, Black’s perspective underscores the need for a more comprehensive and diversified product strategy.
Tesla’s stock closed at $345.16 on Friday, marking a 3.69% daily increase according to Benzinga Pro. While the stock showed slight upward movement in after-hours trading, the consensus price target remains at $232.20, ranging from a high of $400 to a low of $24.86. Analyst ratings suggest a potential downside of 9.39%, with an average target price of $313. The year-to-date surge of 38.94% in Tesla shares, however, reflects the market’s ongoing interest and optimism despite these challenges. This debate highlights the critical strategic decisions facing Tesla as it navigates a rapidly evolving and increasingly competitive landscape.
