Tesla shares plunge nearly 10% as Musk signals more price cuts

April 20 (Reuters) – Tesla Inc’s ( TSLA.O ) shares fell nearly 10% on Thursday after Chief Executive Elon Musk signaled the electric carmaker will continue to cut prices to boost demand even after taking a big hit to margins.

The stock traded at $1[ads1]63, dragging down other automakers. At least 15 analysts lowered their price targets on Tesla, whose market value was on track to fall by $50 billion to around $517 billion if the losses hold. That would put Tesla’s value below that of Meta Platforms Inc ( META.O ) for the first time since 2021.

“Faced with an unstable macroeconomic backdrop and weakened demand, Tesla continues to prioritize units over profits in the near term,” said analysts at Canaccord Genuity.

Tesla’s gross margins fell in the first quarter to the lowest in more than two years, missing market estimates, after the company launched a global price war in January to defend its dominance in the United States and make inroads in China, its second-largest market.

Tesla’s automotive gross margin, excluding regulatory credits and leasing, was 18.3%, missing the target above 20% given in January by Tesla CFO Zachary Kirkhorn.

Tesla has already cut prices six times this year, and Musk suggested more such moves going forward, saying the company will put sales growth ahead of profits in a weak economy.

“We’ve seen that pushing for higher volumes and a bigger fleet is the right choice here versus a lower volume and a higher margin,” he said.

Investors dumped automakers from Europe to the US on fears that margins will be sacrificed to maintain share in a shrinking market.

“Long term, we believe this (Tesla’s price cut) is the right strategy and leverages their cost leadership position. However, this will not come without pain as we now believe margins will get worse before they get better,” RBC analyst Tom Narayan said.

U.S. automakers ranging from Ford Motor Co ( FN ) to startups such as Lucid Group Inc ( LCID.O ) fell between 3.3% and 4.4%.

France-based Renault SA ( RENA.PA ), whose chief financial officer said the company will not drastically cut the prices of its electric cars amid Tesla’s downward “spiral,” was down 7.6%, while Germany’s Volkswagen ( VOWG_p.DE ) fell 3, 5%.

Reporting by Aditya Soni; Editing by Shounak Dasgupta

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