Shares in Tesla Inc. rose more than 10% in late trading today despite a downbeat earnings report and outlook after the electric car maker announced its intention to introduce new, more affordable models in 2025.

For its first quarter that ended on March 31, Tesla reported adjusted earnings per share of 45 cents on revenue of $21.3 billion, the latter down 9% from a year ago. Both fell below an expected 52 cents per share on revenue of $22.3 billion. Tesla’s operating income fell short, coming in at $1.17 billion versus an expected $1.53 billion and its operating profit margin was 5.5% versus an expected 6.6%.

In the quarter, Tesla produced 433,371 vehicles, consisting of 412,376 Model 3s and Ys and 20,995 other models. Where those numbers become interesting is that Tesla delivered only 386,810 vehicles in the quarter, so it’s making more vehicles than it’s selling.

Tesla attributed the drop in sales to the company currently being “between two major growth waves: the first one began with the global expansion of the Model 3/Y platform and we believe the next one will be initiated by advances in autonomy and introduction of new products, including those built on our next generation vehicle platform.”

“In 2024, our vehicle volume growth rate may be notably lower than the growth rate achieved in 2023, as our teams work on the launch of the next generation vehicle and other products,” Tesla’s quarterly update reads.

The new vehicles are what had investors excited. Tesla said they will include “more affordable models” that “utilize aspects of the next generation platform as well as aspects of our current platforms and will be able to be produced on the same manufacturing lines as our current vehicle line.” The new vehicles will “prudently grow our vehicle volumes in a more capex efficient manner during uncertain times,” Tesla added.

The news that Tesla was looking to develop cheaper models came after it was reported two weeks ago that the company had scrapped its low-cost car plans. The “exclusive” news that Tesla was dropping its cheaper models plan from Hyunjoo Jin, Norihiko Shirouzu and Ben Klayman at Reuters hasn’t aged well.

“Tesla is confronting significant strategic and operational challenges, highlighted by a stark 9% drop in deliveries year-over-year, stark competition and market saturation in key regions such as California,” Shoggi Ezeizat, an analyst at global research firm Third Bridge Group Ltd., told SiliconANGLE in an email.

“In China, Tesla’s approach is under scrutiny as it grapples with aging designs and high pricing structures, which starkly contrast with local brands like BYD that offer a broader range of affordable models,” he said. “Our experts suggest that Tesla’s strategic adjustments in China, which focus on cost efficiency and local partnerships, are critical to maintaining its competitiveness in one of the fastest-growing EV markets.”

Photo: Saud Al-Olyan/Flickr