Tesla Model 2 may not fully ramp up until 2027, analyst says

Tesla is likely years away from fully ramping a new lower-cost model, which will take the company longer than Wall Street is assuming, Evercore analysts said after touring the automaker’s Texas factory.

“Tesla increasingly is a ‘2027 story,’” Evercore analysts led by Chris McNally wrote in a report Monday. He questioned whether the best-case scenario for a cheaper vehicle colloquially referred to as Model 2 is more like 500,000 units in 2026, rather than consensus for 1 million-plus.

McNally has the equivalent of a hold recommendation on Tesla and has not rated the company a buy since he initiated coverage in January 2020, according to data compiled by Bloomberg. The stock has risen 310 percent in that span.

CEO Elon Musk has said Tesla is “between two major growth waves,” with the first underpinned by the Model 3 sedan and Model Y crossover, and the second expected from a cheaper next-generation electric vehicle.

The company expects to start production of this EV toward the end of 2025 at its plant in Austin.

The next-generation model’s bill of materials will decline from $28,000 to $20,000, and likely have around 250 miles (402 km) of range and no glass roof, McNally wrote.

A “big debate” will be whether Tesla’s driver-assistance hardware will be standard, he said, citing his team’s belief that the hardware could cost $2,000 to $3,000.

Evercore now expects Tesla to deliver around 2.7 million vehicles in 2026, meaning its estimate for earnings per share that year is 18 percent to 20 percent below consensus.