Tesla shares fall as Musk again cuts prices ahead of earnings
(Bloomberg) — Tesla Inc. shares fell after the automaker cut U.S. prices for the second time this month, further demonstrating Elon Musk’s willingness to sacrifice profitability for demand.
Most read from Bloomberg
The Austin, Texas-based company marked down each version of its Model Y sports car by $3,000. It also cut the cost of the base Model 3 by 4.7% to less than $40,000 for the first time in years.
Tesla’s stock fell as much as 2.8% to $179.08 before the start of regular trading on Wednesday. The shares are up 50 percent this year.
Read more: Tesla’s price cut puts high valuation to the test
This is Tesla̵[ads1]7;s second price cut in the US this month after several quarters of deliveries fell short of some analysts’ expectations. The company is in the rare position among EV makers of having profit margins to work with, as incumbents including Ford Motor Co. and newer players such as Rivian Automotive Inc. and Lucid Group Inc. are struggling to make money on lower volumes.
After several rounds of reductions, the starting prices of Tesla’s two high-volume models are significantly lower than they were supposed to start the year. The base Model Y is 29% cheaper, and the Model 3 can be had for 15% less.
Musk has pushed back against media coverage of the cuts. “We are not ‘starting a price war,'” the CEO tweeted on April 15. “We’re just lowering prices to enable affordability at scale.”
Related: Tesla gives buyers reason to wait as prices continue to fall
After Tesla’s first series price cut in January, Musk said weeks later that orders were coming in at nearly twice the production rate. But the automaker wasn’t able to sustain that momentum — first-quarter deliveries rose roughly 4% from the previous three months, and Tesla produced nearly 18,000 more cars than it delivered to customers.
Despite a second set of price cuts for the Model S and X in early March, Tesla delivered just 10,695 of those vehicles in the quarter, the lowest since the third quarter of 2021.
Tesla is due to report first-quarter results on Wednesday in the US, where investors will focus on the toll that previous price cuts are taking on profit margins. Another concern is the extent to which legacy manufacturers are ramping up EV production and luring consumers away from Musk’s limited portfolio of models, Bloomberg Intelligence analysts wrote in their preview note.
(Updates with early trading in the third paragraph. An earlier version of this story corrected the price cut percentages.)
Most read from Bloomberg Businessweek
©2023 Bloomberg LP
