By Tesla Inc (NASDAQ: TSLA) is keeping in the green this morning even though it reported a 71% decline in net income for its fourth financial quarter.
But not everyone is as optimistic about the EV stock.
Steve Westly – the company’s former board member agrees that investors would be better off selling Tesla stock unless it does two things:
- Launch a sub $30,000 model
- Fix full self-driving (FSD)
Unless TSLA delivers on these two promises, its current valuation of $1.24 trillion is not justified, Westley argued in a CNBC interview on Thursday.
Tesla needs a lower-cost model to stay ahead of the competition
Steve Westly called on the need for Tesla to launch a lower-cost model to stay competitive against Chinese rivals, particularly the Shenzhen-headquartered BYD.
He went on to criticize Tesla for being slow in rolling out new products.
The company is in dire need of a sub $30,000 model after its latest, Cybertruck, ended up being a flop, according to Westly.
Meanwhile, the China-based EV firms are introducing new models in the range of $10,000 to $20,000, with BYD setting up factories in South America, Thailand, and, most importantly, Hungary.
That’s significant since the company’s new plants suggest it’s getting ready to flood the European market with its electric vehicles.
“This is all going to put pressure on Tesla. They’ve got to get a low-cost vehicle out,” Westley added.
On the plus side, “battery prices are dropping quickly, they’re expected to drop another 50%” by the end of this decade, which should make it somewhat easier for Tesla to meet this first target.
Tesla needs to fix self-driving to justify premium valuation
Tesla stock has long enjoyed a premium because billionaire Elon Musk continues to promise full self-driving capabilities in the company’s vehicles every year.
But it has now become the need of the hour for Tesla to advance its FSD plans if it wants to grow into its premium valuation.
“They’re lagging behind Waymo, there’s a lot of catching up to do,” Westly argued.
Tesla’s full self-driving technology is currently under investigation by the National Highway Traffic Safety Administration following multiple reports of FSD-related crashes.
A good start, according to Steve Westly, would be to secure regulatory approval for its autonomous driving system in Austin.
Note that chief executive Elon Musk expects the launch of “unsupervised full self-driving as a paid service” in Austin in June.
Westly’s remarks arrive on the heels of Tesla’s earnings for the fourth quarter.
The EV maker earned 73 cents a share as its bitcoin holdings delivered a big boost to earnings in Q4.
Still, the company came in below the 76 cents per share that analysts had forecast.
Note that Tesla stock does not pay a dividend at the time of writing.
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