In a move to calm concerned investors and reverse the company's sagging profits, Tesla CEO Elon Musk announced that the company will accelerate the rollout of more affordable electric vehicles. The news sent Tesla's stock soaring by over 11% on Wednesday.

The announcement comes in the wake of Tesla's recent earnings report, which revealed a decline in profit to its lowest level in any three-month period since 2021. Despite this, Dan Ives, senior analyst at Wedbush Securities, expressed optimism, stating that he maintains a "bullish investment thesis" due to the anticipated release of a lower-cost Tesla model, referred to as the "Model 2.5" by Musk.

Although specific details about the affordable models were not provided, Musk hinted that they could hit the streets as early as next year. This low-cost electric vehicle is expected to play a crucial role in Tesla's volume turnaround in 2025.

During the earnings call, Musk also highlighted Tesla's efforts to expand its business into artificial intelligence, humanoid robots, and autonomous vehicles. However, some analysts interpreted Musk's remarks about the cheaper models being built using current platforms and production lines as a retreat from more ambitious plans for an all-new $25,000 model.

Tesla has been grappling with a decline in demand for electric vehicles, intensified by a price war in China, resulting in a 42% drop in the company's stock since the beginning of the year. The first quarter of 2024 proved challenging for the company, with revenue dropping by 9% to $21.30 billion, the largest decline since 2012. Tesla's operating margin also significantly shrank to 5.5% from 11.4% the previous year.

While these weak first-quarter results initially dampened investor confidence, Tesla's new plans to introduce affordable EVs helped alleviate concerns on Wall Street. The anticipated growth in 2024 is expected to be "notably lower" than the previous year, according to the company.

Tesla's challenges have not been limited to financial struggles. The company recently experienced a steep 8.5% drop in deliveries in the first quarter and faced concerns over potential safety issues with the accelerator pedal in the Cybertruck, resulting in a pause in deliveries. Additionally, key executives have announced their departures in recent weeks, adding to the turmoil within the company.

With the release of new affordable EVs, Tesla aims to regain momentum in the highly competitive electric vehicle market, facing growing competition from Chinese companies like BYD. The company has also made significant pricing adjustments in major markets, including China and Germany. Over the weekend, Tesla slashed the price of its Full Self-Driving software from $12,000 to $8,000 in the US.

As Tesla's stock bounces back and Musk's promises of affordable EVs ignite investor optimism, the upcoming launch of the lower-cost Model 2.5 could shape the company's fortunes and reaffirm support for Musk's $56 billion compensation package, which faced opposition following the decline in Tesla's share price and concerns over the board's effectiveness.