Give Tesla TSLA stock some credit. While its year-to-date gain of nearly 11% trails the S&P 500, it’s doubled off its April trough — a feat accomplished despite sluggish sales and the removal of the federal electric vehicle (EV) tax credit, which had long been enticement for drivers to try EVs.
Elon Musk’s company isn’t taking those headwinds lying down. In fact, Tesla’s efforts to juice its top line could bring the the Direxion Daily TSLA Bull 2X Shares (TSLL ) into focus for aggressive traders over the near-term. The geared single-stock ETF could be worth monitoring this week because Tesla news flow suggests the EV giant is nearing introduction of its most affordable EV to date, in the form of a lower cost Model Y.
“Chief Executive Elon Musk for years has promised mass market vehicles, though last year he canceled plans to build an all-new $25,000 EV," Reuters first reported. "The car expected this week is an “affordable” vehicle based on current manufacturing and design platforms,” reported the wire service.
Why TSLL Could Tempt
A legitimately affordable Tesla could spark TSLL for multiple reasons, not the least of which is the fact that average EV prices range from around $57,000 to $59,000. That’s well into luxury car territory, and about $9,000 to $10,000 more than the average price of a new gas-powered vehicle.
A lower cost Model Y could propel TSLL for another reason. Not only could the more affordable EV provide a much-needed jolt to Tesla’s sales, it could generate a new batch of devoted, long-term customers. Think of it this way. Luxury carmakers like BMW and Mercedes have long offered entry-level models as ways of getting cost-conscious consumers into the lineup. As those customers’ incomes grow, many trade up to the manufacturer’s pricier cars.
Perhaps bolstering the near-term case for TSLL are remarks recently made by Musk himself, indicating that a lower cost Model Y may be in the works.
“It’s the Model Y,” he said on Tesla’s most recent quarterly earnings conference call. “The desire to buy the car is very high; it’s just that people don’t have enough money in their bank accounts to afford it. So, the more affordable we can make the car, the better."
There’s speculation that production of the cheaper EV already commenced, but Tesla was holding back on larger output until the aforementioned EV tax credit officially became a thing of the past.
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