Deutsche Bank has revised its rating on Tesla (TSLA), downgrading the stock to Hold from a Buy rating as the automaker shifts its focus to the production of a robotaxi. Deutsche Bank Lead US Autos Analyst Emmanuel Rosner joins Market Domination to explain the downgrade.

Rosner says "there's a strategic change" occurring within Tesla, saying that the company's new pricing strategies could potentially boost margins and overall profitability. However, he cautions that if Tesla redirects all of its resources toward the development of a robotaxi, it could face prolonged challenges.

For long-term investors, the concept of the robotaxi remains "exciting", but Rosner expresses concerns about Tesla's new direction. He emphasizes the risks of concentrating the company’s efforts solely on the robotaxi, moving away from its core electric vehicle production. According to Rosner, this strategy "is extremely risky for investors", as "it's betting the entire company on robotaxi", an unproven market segment that other automotive competitors have faced setbacks in.

For more expert insight and the latest market action, click here to watch this full episode of Market Domination.

This post was written by Angel Smith

Video Transcript

JULIE HYMAN: All right. It is time now for the Call of the Day. And we are talking again about Tesla. It is getting another bear, or at least not as strong a bull, on Wall Street. A long-time Tesla bull downgrading the stock to hold from buy.

Emmanuel Rosner, who is Deutsche Bank lead US auto analyst, is joining us now on what was behind that change in perspective. Emmanuel, thank you so much for being here. And it seems like the change in perspective is relatively straightforward here. It's what looks like a pivot away or a de-emphasizing of the lower cost model Tesla, right?

EMMANUEL ROSNER: That is correct. Thanks for having me. So I believe that there is a strategic change going on at Tesla right now, and this is essentially thesis changing. Even though we've been berated, we've been at the forefront of warning investors that near-term conditions are really, really challenging for Tesla, but that you shouldn't really care that much if you're longer term investors because around the corner there's this Model 2, the cheaper model, coming at the $25,000 price point, which could really inflect things back up-- volumes, margins, earnings, free cash flow.

These would be really the game changer. Now, based on multiple media reports, it very much seems like Tesla is no longer working on the Model 2. Instead, it's putting all its eggs in the robotaxi basket.