Tesla shares fall after shipments report raises concerns over price cuts


Employees of the Tesla Gigafactory Berlin Brandenburg work on the final inspection of the finished Model Y electric vehicles. The Tesla factory was opened and put into operation on March 22, 2022.

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You’re here Shares fell more than 7% on Monday after the company’s quarterly shipments report led some investors to worry that further price cuts would be needed to boost sales, which would eat into margins.

Over the weekend, Tesla reported first-quarter deliveries of 422,875 electric vehicles and production of 440,808 cars. The record numbers for Tesla represented a 4% growth in shipments from the prior period and followed repeated price cuts in the United States, China and Europe.

Some of the price reductions in the United States were implemented in part to allow Tesla and its customers to take advantage of tax credits available under the Inflation Reduction Act. But a lingering concern is that increased competition will force the company to keep lowering prices if it wants to attract buyers as new electric vehicles continue to hit the market.

“Many investors believe Tesla’s recent price cuts reflect a structural cost advantage that will allow it to pressure rivals, capture outsized volume and dominate the electric vehicle market,” analyst Toni Sacconaghi wrote. at Bernstein, in a note following the report on deliveries. “We maintain that price cuts have and will undermine industry profitability (including Tesla’s), but incumbents have deep pockets and are unlikely to back down.”

Bernstein has a price target of $150 on the stock, well below the current price of just over $193. Sacconaghi said: “The key question for investors is what might margins be, in the face of significant price declines but improving commodity costs?”

Tesla’s first-quarter deliveries were below Wall Street expectations, judging by a consensus compiled by FactSet. However, the numbers matched numbers compiled by Tesla and sent by the company to select shareholders before the report was released.

According to FactSet, analysts expected Tesla to announce deliveries of about 432,000 vehicles for the quarter. Estimates ranged from 410,000 to 451,000. An independent researcher widely followed by Tesla fans and bulls, who uses the handle @TroyTeslike on Twitter, expected deliveries of around 427,000.

Tesla said in its email to shareholders that analysts expect deliveries of about 421,500 vehicles, based on a consensus of 25 analysts tracked by the company.

For 2023, Tesla had already said it waits produce 1.8 million cars and hinted that it expected deliveries around that amount. Company executives said they are aiming for 50% average annual growth in production volume and sales over a multi-year horizon.

Reaching that level of growth will likely require further price cuts, some analysts said.

According to Barclays’ Dan Levy, who has a neutral rating on the stock and a price target of $275, vehicle inventory accumulation has been an ongoing trend over the past three quarters. He wrote that “incremental price reductions are likely needed,” especially as the company ramps up production at new plants in Austin, Texas, and outside of Berlin.

– CNBC’s Michael Bloom contributed to this report

SHOW: Full CNBC interview with Bernstein’s Toni Sacconaghi

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