Prediction: A Cheaper EV Could Be a Game Changer for Tesla's Business

Key Points

Tesla could be preparing to launch a cheaper EV.

This could help the company broaden its appeal among customers.

Tesla's shares look expensive, even considering its humanoid robot project.

• These 10 stocks could mint the next wave of millionaires ›

Tesla's (NASDAQ: TSLA) shares have performed well over the past two years, significantly outpacing broader equities. That's a bit odd considering the company's deliveries of electric vehicles (EVs) have declined in each of its two most recent fiscal years. The company's revenue and net income have also been unimpressive over this period. Can the carmaker boost its EV business and improve its financial results? Recent reports of one of Tesla's projects could eventually allow it to do that. Let's look into it.

Will AI create the world's first trillionaire? Our team just released a report on the one little-known company, called an "Indispensable Monopoly" providing the critical technology Nvidia and Intel both need. Continue »

Tesla's plans to supercharge its business

Tesla is rumored to be working on a brand-new and cheaper EV model. It's important to highlight that these plans are apparently still in the early stages, and production hasn't officially started. However, according to reports, the company will first launch this model in the Chinese market before expanding to other regions. Here's why this could be a game changer for Tesla.

The company is facing increased competition. Domestically, it will soon have to contend with Rivian's R2 -- which was set to start shipping to customers in the second quarter -- and will compete with the Model Y, Tesla's most popular EV (and also the single best-selling vehicle in the world, even including non-EVs). Meanwhile, Tesla has been outpaced by the Chinese EV maker, BYD Company.

Part of BYD's appeal is that it offers more EV options, including some for price-conscious customers. Tesla launching a cheaper car could help it wrestle back some market share in China and perhaps attract a far larger pool of consumers worldwide. This is important considering the company's long-term strategy. While vehicle sales make up most of the company's revenue, it's not a particularly high-margin business, and it can be unpredictable from one year to the next.

A larger installed base will help boost the company's higher-margin recurring revenue from FSD (fully self-driving) subscriptions. An increasing number of cars on the road also gives Tesla access to more real-world data to improve its FSD system. So, offering cheaper cars could have a positive ripple effect on the business.

Tesla's future isn't just about its EVs. The company is increasingly shifting toward developing its humanoid robot, Optimus. That's partly why Tesla decided to discontinue its Model S and Model X and repurpose space in its Fremont factory in California to building its robots. The AI robotics market could represent a massive opportunity, one that Tesla is well-positioned to capitalize on.

Does all of this make the stock a buy? My view is that Tesla's shares are risky. The stock is trading at levels that seem to already factor in a good outcome for its humanoid robot project, given its forward price-to-earnings of 172.4. Meanwhile, although a cheaper EV could help it bounce back in its core market, it hasn't even started production yet, while competitors continue to make aggressive plans to steal some market share.

Lastly, the company will still face a range of potential headwinds. Investors should particularly monitor legal and regulatory risks that have already affected the business. Long-term investors who can tolerate significant volatility might want to consider Tesla. Others should stay away.

Don’t miss this second chance at a potentially lucrative opportunity

Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.

On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:

Nvidia:if you invested $1,000 when we doubled down in 2009,you’d have $489,281!Apple:*if you invested $1,000 when we doubled down in 2008,you’d have $49,600!Netflix:if you invested $1,000 when we doubled down in 2004,you’d have $555,526!

Right now, we’re issuing “Double Down” alerts for three incredible companies, available when you join Stock Advisor, and there may not be another chance like this anytime soon.

**Stock Advisor returns as of April 11, 2026. *

Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool recommends BYD Company. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.