One thinks Tesla stock is a buy, and it’s back to $300; another thinks it’s a sell, going down to $150. But Piper Sandler’s Alexander Potter, Bernstein’s Toni Sacconaghi and analysts who are neutral on Tesla stock All agree on this: The company’s EVs are only going to get cheaper. It’s a direct response to Tesla’s move last week — on Thursday night after many people signed up for the Good Friday holiday — to cut prices on its U.S. line again. With the introduction of a new $49,990 base model, the Model Y now costs 24% less than the cheapest SUV version from earlier this year. The company is also cutting the price of its oldest cars by as much as $34,000.
“We believe investors should continue to relentlessly cut prices as Tesla moves to hasten the demise of gasoline vehicles,” Porter wrote in an April 10 note. Tesla’s superior cost structure, they suit Tesla. “
Sacconaghi was less sanguine about the automaker hurting its profitability.
Technical analysts at Bernstein wrote: “There is no doubt that the price cut reflects Tesla’s need to stimulate demand and is a clear trade-off between margins and volume. While many investors have been hoping that margins in the first quarter may touch bottom, but we don’t think that’s necessarily the case, especially given that we think further cuts are likely.”
Analysts’ forecasts of more price cuts quickly proved prescient. On Wednesday, the Hong Kong Economic Daily reported that Tesla plans to cut prices of most Model 3 and Y models sold in Hong Kong by as much as 15%.
In the debate among market forecasters about whether Tesla is going on offense or defense, the minds of consumers who have been considering buying a car from the company have been lost. After the events of the past few months, how many would hold off, thinking it would be better to wait for a better deal?
Elon Musk hasn’t promised Tesla will stop cutting jobs. Instead, he mentioned that the company is limited in how many cars it can sell for the price it charges.
“There is a lot of demand for our products,” Musk tweeted last week. “But if the price is more than what people have, then that demand won’t matter.”
It was a familiar phrase from the CEO, whose stated mission is to accelerate the transition to sustainable energy. There’s a perfectly valid reason why accelerating the transition to EVs is difficult when your vehicle costs as much as a Tesla.
But while Musk called his critics out of touch, his comments amounted to an acknowledgment that supply and demand dynamics are no longer in Tesla’s favor as they have been in the past few years. The company appears to be bowing to the same pressure as the rest of the industry to dial back prices as supply chain constraints ease.
Cox Automotive said Tuesday that new vehicles are again selling below manufacturers’ suggested retail prices after chip shortages and other issues turned the market upside down.
Tesla delivered more than 422,000 vehicles in the first quarter, but produced more than 440,000. That mismatch — which it again blames on cars being shipped at the end of the quarter — will bring Musk back to discussing demand when the company reports quarterly earnings a week from today.
Tesla said at its last shareholder meeting in January: “To become a multimillion-dollar automaker, affordability must improve. Our relentless drive to control costs and innovate on costs is why we believe no other OEM can The reason for better handling 2023 and ultimately succeeding in the long run is better than us.”
First published date: April 13, 2023 at 08:34 AM CST