Tesla experienced a challenging week as its shares slipped 3.6%, capping a tumultuous period that saw the stock lose nearly 6% due to weakening electric vehicle (EV) demand and speculation about a significant product change. On Friday, reports emerged that Tesla had scrapped its plans to produce a long-awaited sub-$30,000 EV, known as the Model 2, and instead refocus on developing a self-driving robotaxi.

According to Reuters, three sources familiar with the matter confirmed the cancellation of the Model 2. However, Tesla CEO Elon Musk took to the social media platform X, which he also owns, to refute the report, accusing Reuters of spreading misinformation.

Undeterred by the negative sentiment, Musk later announced via X that Tesla would be unveiling the much-anticipated robotaxi on August 8th, adding further intrigue to the situation.

The setback comes after a disappointing first quarter for Tesla, which saw its stock plummet by nearly a third and become the worst-performing stock in the S&P 500. The drop in sales is evident in the recently released delivery numbers, which fell well short of market expectations.

In Q1, Tesla reported global deliveries of 386,810 vehicles, significantly lower than the estimated 449,080. This figure represented a nearly 10% decline from the previous year when Tesla delivered 423,000 vehicles. The drop in deliveries was even more pronounced when compared to the previous quarter, with a decline of over 20%. This decline also marked the first year-over-year drop in first-quarter deliveries since 2020.

The significant discrepancy between production and deliveries has raised concerns, suggesting a potential demand issue for the EV giant. Analysts, such as Emmanuel Rosner from Deutsche Bank, believe there may be a serious demand issue beyond the acknowledged production bottlenecks in Fremont and Berlin.

Adding to the challenges faced by Tesla, just days before the disappointing delivery report, the company raised prices on its most popular vehicle, the Model Y. The price hike affected all three trim levels in the US, with a $1,000 increase. Similar adjustments were made in China, where the Model Y Long Range version rose by 5,000 yuan, reaching 304,900 yuan, and the Performance version also increased by 5,000 yuan, reaching 368,900 yuan.

In an attempt to boost demand in China, Tesla introduced new incentives, including zero-interest loans and free trials of its self-driving software. However, with a highly competitive EV market in China and rivals like Xiaomi selling out their first model in just 24 hours, Tesla may have to consider further price adjustments.

Surprisingly, despite the April 1 price hike, Tesla's inventory is still offering significant discounts. For example, customized Model Y SUVs are being sold at prices $4,600 lower than the suggested retail price, while some Long Range and Performance models are discounted by up to $5,000, depending on the location.

Analysts, such as Garrett Nelson from CFRA, had hoped that Tesla's next-generation EV model would act as a catalyst to revive the stock. However, with the cancellation of the Model 2, these expectations have been challenged, leaving investors concerned about the company's prospects.

Tesla's disappointing first quarter, coupled with the cancellation of a highly anticipated model, has raised doubts about its ability to maintain strong demand in several regions, including China and Europe. As Tesla faces emerging risks and intense competition, it remains to be seen how the company will navigate these challenges and reposition itself in the EV market.

In the coming weeks, investors and observers will be keeping a close eye on Tesla's actions, particularly the unveiling of the robotaxi, as they seek to gain a clearer understanding of the company's future trajectory.