Elon Musk gave Tesla investors the one thing they've been demanding — and it worked brilliantly

• Elon Musk said Tesla will get cheaper electric vehicles out sooner.
• The move came after Tesla lowered prices due to falling sales and increasing competition.
• Tesla's first quarter was marked by fewer deliveries, layoffs, and a stock rout.

Elon Musk dangled a long-awaited prize — cheaper Tesla models — in front of investors on Tuesday. It sent stock soaring.

In Tesla's highly anticipated first-quarter earnings call, CEO Musk talked about the company's efforts to accelerate the production of cheaper electric vehicles. Investors have been clamoring for the cars for months amid falling sales of current models.

Musk didn't give many specifics, like how much the cars will cost or exactly when they'll be available. But it was enough to calm investors, and Tesla's stock rose 13% in after-hours trading.

"If you have a great product at a great price, the sales will be excellent," Musk said on the call.

He said that Tesla plans to keep making its cars and prices more competitive. Carmakers around the world, including once-dismissive Musk, worry about Chinese EVs' low prices undercutting their sales.

Tesla's cheaper models will be produced on existing manufacturing lines. Production might start late this year or in early 2025, instead of the second half of 2025, Musk said.

Tesla's cheapest car in the US is the Model 3, which starts at $38,990. The average US EV costs $53,758. The company sold 220,910 of the Model 3 last year.

Analysts were cautiously optimistic about Musk's announcement.

"Sounds promising, but Tesla is becoming more of a show-me stock based on how many delays we've seen in previous roll outs," Jay Woods, the chief global strategist at Freedom Capital Markets, told Reuters. "If they can deliver, then this is a great development."

Days before earnings, the electric vehicle maker slashed prices of cars in key markets, including the US, China, and Europe.

Tesla has been teasing a car under $30,000 since 2020. Earlier this month, Reuters reported that the company was scrapping plans for a compact, $25,000 car. Musk denied the story.

Significant challenges and a plummeting stock

While a promise of cheaper cars relieved investors, Tesla's troubles are far from over.

During Tuesday's earnings call, analysts questioned Musk, who has leadership roles in at least five companies, about whether he was spread too thin. Tesla's head of investor relations announced his departure from the company during the call, making him the third senior executive to leave in the past week.

The first quarter of the year has been disastrous for the EV maker.

Tesla reported disappointing first-quarter deliveries earlier this month and went through a messy 10% global layoff last week. On Friday, Tesla recalled nearly 4,000 Cybertrucks because of faulty accelerators. Price cuts Tesla made on the weekend were reciprocated by Chinese EV rivals, who cut theirs even further.

Tesla's stock is down 42% year-to-date.