As Tesla Inc. faces questions about whether demand for the Model 3 compact car is slowing, Chief Executive Elon Musk wants investors to focus on the auto maker's road much farther ahead: vehicles driving themselves in a robot-taxi fleet.
Mr. Musk is gathering investors Monday to reveal the electric-car maker's latest efforts to develop self-driving car technology and his strategy for deploying it. The presentation at the company's Palo Alto, Calif., headquarters is scheduled two days before Tesla reports quarterly financial results, which are expected to show a loss on slumping vehicle sales.
The week's twin billing encapsulates the polarizing nature of Tesla, which has sharply divided investors between skeptics and believers. Monday's event will likely showcase Mr. Musk as the exuberant salesman pitching his futuristic vision for Tesla. First-quarter results, on the other hand, are backward looking by definition and could prompt a defense of operational struggles.
Some investors praised Tesla's decision to highlight its driverless-car technology because they said it is a reason to value Tesla more than other auto makers. Those betting against Tesla said the investor day is a marketing stunt ahead of expected bad news.
“I've seen this movie before,” said David Kudla, chief executive of Mainstay Capital Management, a short-seller of Tesla stock. “Whether it's launching the Tesla into space, whether it's some sort of product reveal or some grand announcement that comes a day or two before earnings.”
Tesla declined to comment. The investor presentation and earnings report come after Friday's disclosure that Tesla plans to shrink its board to seven from 11 directors as part of a series of moves to improve its governance. Since Tesla unveiled the Model 3 in March 2016 and received a deluge of $1,000 deposits for a car aimed at a more mainstream buyer, the company has sought to show it has the manufacturing muscle to meet customer demand.
After overcoming some production challenges for the model, Tesla now faces questions about whether it has reached a limit on buyers of a car that on average sold for $57,000 last year, according to analyst estimates.
Tesla has already warned it would report a loss instead of a previously expected profit for the first quarter and said vehicle deliveries fell 31% from three months earlier, citing challenges in delivering the Model 3 overseas. The company brought the car's price down to $35,000 after the phase out of U.S. tax credits for buyers of electric cars.
Unlike major auto makers, Tesla doesn't disclose how many cars and sport-utility vehicles it sells. LMC Automotive, a forecasting firm, estimates that Tesla's U.S. vehicle deliveries fell 57% to 31,900 from the fourth quarter and that the company will sell 13% fewer vehicles in the U.S. this year compared with 2018.
“You're probably leveling into a more natural area of the inevitable supply-and-demand balance,” said Jeff Schuster, an LMC Automotive analyst. Mr. Musk has said he believes there is an annual demand for 500,000 Model 3s even as Americans prefer SUVs over sedans. “The demand for Model 3 is insanely high,” Mr. Musk told investors last quarter before the most recent price cuts. “The inhibitor is affordability…It's got nothing to do with desire.”
At Monday's presentation — slated to be live-streamed — Mr. Musk might show off Tesla's technological prowess and tout fleets of robot-taxis. Tesla investor ARK Investment says a successful robot-taxi fleet could boost the company's stock to $4,000 a share in 2023. On Friday, Tesla's shares closed at $273.26, down 18% for the year.
When Tesla announced April 11 that it was offering 36-month lease financing for the Model 3, the company said customers wouldn't be able to purchase the vehicles at the end of the term because the cars would be deployed in a robot fleet. Car companies normally allow a customer to buy the car or sell it used.
Mr. Musk said the price of the so-called full self-driving feature on Tesla vehicles will increase “substantially over time” beginning on May 1. He expects the fully self-driving system to be “feature complete” this year, meaning the vehicle will have the ability to drive to a destination without user intervention but will still require observation.
BY TIM HIGGINS