Tesla (TSLA) Executives Clash Over Musk’s Denial of $25K EV Project, Triggering SEC Concerns

Some senior Tesla (TSLA) executives were alarmed when Elon Musk publicly denied that the company had canceled its planned $25,000 electric vehicle project, a move investors had long expected to drive explosive sales growth. Musk’s defiant post on X proclaiming “Reuters is lying” momentarily halted a 6% slide in Tesla shares, but raised internal questions about how Tesla should address perplexed suppliers and investors who had factored a new low-cost model into their forecasts. A year later, Tesla still has not released the all-new Model 2, instead opting to develop more affordable, stripped-down versions of its existing Model 3 and Model Y platforms. On June 2, Musk announced he would step away from his advisory role to President Trump to refocus on Tesla, SpaceX, and his other ventures, a departure analysts say may reduce political distractions and allow the automaker to rebuild its growth narrative. Market Overview:

• Executives worried Musk misled investors by denying Model 2 cancellation
• Instead of a ground-up design, Tesla will launch budget variants of Model 3 and Model Y in 2025
• Musk exits Trump advisory post to dedicate more attention to Tesla’s core operations

Key Points:

• Musk’s X denial paused share losses but triggered executive concerns about transparency
• Originally touted as a breakthrough in manufacturing innovation, the $25,000 EV was quietly shelved
• Affordable versions of existing models aim to bridge Tesla’s lineup gap by mid-2025

Looking Ahead:

• Investor sentiment may brighten as Musk’s political involvement wanes
• Success of stripped-down models is critical to reversing Tesla’s recent sales declines
• Competition from BYD’s low-cost offerings heightens urgency for Tesla’s budget EV strategy

Bull Case:

• A U.S. trade court blocked a significant portion of President Trump's recent emergency-based tariffs, ruling the administration overstepped its legal authority.
• This decision provides immediate, albeit potentially temporary, relief to sectors hardest hit by these specific trade disruptions, such as automakers, banks, luxury brands, and semiconductor makers.
• The court's ruling affirms that Congress holds the primary power to regulate commerce, placing a legal check on the president's unilateral authority to impose broad tariffs under emergency powers.
• This ruling could temporarily reduce the U.S.'s average effective tariff rate, offering some respite to businesses and consumers who bear the cost of these duties.
• The legal challenge may force the administration to use more traditional, and often slower, procedural avenues for imposing future tariffs, potentially leading to more deliberation.

Bear Case:

• Financial institutions like Goldman Sachs and Morgan Stanley caution that the court's decision may only offer a temporary delay, as the Trump administration retains multiple other legal authorities to levy import taxes.
• The Trump administration immediately announced its intention to appeal the ruling, signaling prolonged legal battles and continued uncertainty regarding the tariffs blocked under emergency powers.
• Significant existing tariffs, such as those on steel, aluminum, and autos under different statutes, and some prior tariffs (e.g., on certain Chinese goods), are not affected by this specific court ruling.
• Analysts expect the administration will likely consider a "patchwork tariff approach" or utilize alternative statutes to reimpose similar duties, meaning trade-policy volatility is far from resolved.
• With substantial annual tariff revenue potentially at stake from the broader tariff strategy, the administration has a strong incentive to find ways to maintain or recover these duties.
• The ongoing uncertainty surrounding tariffs and potential new levies under different authorities will remain a major overhang for markets, likely causing businesses to remain cautious about investments and strategic decisions.
• The administration could also seek to ignore the ruling or push for legislative changes to bolster its tariff authority, further extending the period of trade policy instability.

Some executives cautioned that Musk’s denial could attract SEC scrutiny, given his 2018 settlement requiring pre-approval of certain posts to avoid misleading investors. On Tesla’s April earnings call, engineering chief Lars Moravy confirmed the affordable models would share existing platforms to reduce costs, raising questions about whether they would generate the same market impact as a purpose-built electric car. In the first quarter of 2025, Tesla posted its first annual vehicle sales decline in 2024 and a 13% drop in Q1 2025, as rising competition and public protests over Musk’s political activities weighed on the brand. Meanwhile, BYD’s Seagull hatchback has undercut Tesla on price in Europe, signaling that the race for low-cost EV supremacy may leave Tesla playing catch-up. With Musk’s renewed focus and the rollout of budget variants still months away, many investors say the company’s next move will be pivotal to restoring confidence in its long-term growth trajectory.

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