Tesla (TSLA) is giving up on the Cybertruck. Plagued by recalls, quality problems, and brand damage, the company cut its losses.
CEO Elon Musk said last Friday that Tesla will wind down the truck EV. This gives Rivian (RIVN) a much-needed boost. RIVN stock gained 12% last week. Musk said discontinuing the model would let Tesla produce more Cybercabs. This pivot is far from an assured success.
The Cybercab is critical to proving Tesla’s autonomous vehicle promise. Its ADAS relies on camera sensors alone. Competitors like Alphabet’s (GOOG) Waymo use LiDAR, cameras, and external microphones. This gives a complete 360-degree view of the vehicle’s surroundings. Conversely, poor weather conditions and misreading surroundings limit Tesla’s ADAS.
Even BMW and Mercedes-Benz have ADAS solutions that include radar.
Regulators might scrutinize Cybercab’s safety, delaying approval. Tesla would need to significantly ramp up research and development spending to catch up to its peers.
Fortunately, Cybercab should benefit from the consumer’s familiarity with the Tesla brand. The cab may also undermine competitors by charging far less.
Tesla shares bottomed in late July in the low $300s. The uptrend to nearly $420 ended abruptly last week. Markets reset TSLA stock valuations, sending the share price down by 10.4%. The P/E fell to below 400 times.
Tesla fans need not worry. The stock typically trends lower, then bottoms. A bullish catalyst reverses the downtrend, rewarding speculative investors.
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