Should You Sell Tesla Before June 30? Hint: Don't Dare

Tesla (NASDAQ: TSLA) investors have had their pick of bad news and headlines to dwell on, there are plenty of options. CEO Elon Musk has rubbed some consumers the wrong way with politics, the automaker's limited product portfolio is aging and conceding market share, and Chinese rival BYD Company has overtaken Tesla in global EV sales and recently announced 11 new models are on the way, among many others.

At first glance, Tesla announcing it would discontinue production of the Model S and X during the second quarter, which ends June 30, might sound devastating considering it sells only five vehicle models. But let's take a deep breath, take a look at some data, and then pinpoint what should actually concern investors.

Image source: Tesla.

Natural obsolescence

The definition of the phrase above is the process by which a product becomes less useful, out of date, or unavailable over time due to technological advancements or environmental conditions. Tesla's Model S and X are an example of natural obsolescence where the electric vehicle (EV) industry has made rapid advancements in recent years to improve performance and range all while lowering costs and building scale.

The simple truth is that the Model S and X served their purpose, and are now outdated on a number of different levels. To Tesla, the two models have been largely irrelevant to global deliveries for years now -- essentially since the Model Y hit the roads.

Data source: Tesla press releases. Image source: Author.

Tesla calls it an honorable discharge, and that's fair, but the truth is the Model S and X needed replacing. This is where it gets interesting for Tesla investors, because rather than replacing the outgoing vehicles with newer more competitive models, the automaker is not just shifting gears, it's shifting its entire business vision.

"Tesla formalized its ambitious new direction: The company is burning the boats, pinning its future on autonomous cars and robots," Piper Sandler said after the earnings call Jan. 28, according to Automotive News.

Tesla plans to take production capacity of the Model S and X in its Fremont factory and transform that into an Optimus factory with the long-term goal of building a million units of Optimus robots annually. Significant production of Optimus isn't expected until the end of the year, although some might call that ambitious or premature considering the steep learning curve of the technology, personnel turnover, and a history of falling short of production targets and schedules.

The real concern for investors

There's a combination of factors that should have Tesla investors nervous in the near term. There's the fact that global sales have declined for two straight years with more and more analysts noting 2026 could add to that streak, rather than reverse it.

There's also the fact that not only is Tesla discontinuing the Model S and X, its remaining high-volume Model 3 and Y are aging. While so far the aging Model 3 and Y have fared better than traditional older models, typically sales will eventually fall off a cliff if the model isn't refreshed or replaced.

Now, combine those two previously mentioned factors with Tesla's plans to double its capital expenditures to over $20 billion, and analysts now anticipate that Tesla will soon be spending more cash than it takes in -- a big reversal from seven years of positive cash flow.

Is it time to sell Tesla before it discontinues the Model S and X by June 30? Absolutely not. Should investors revisit their Tesla investing thesis because the automaker is quickly becoming everything but? Absolutely.

Daniel Miller has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool recommends BYD Company. The Motley Fool has a disclosure policy.