Tesla cuts EV prices ahead of Q1 earnings report
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Tesla has once again lowered its electric vehicle (EV) prices for the sixth time this year, including for its Model Y and Model 3 cars in the United States.
The move is thought to be an attempt to increase sales even at the cost of the company's industry-leading profit margins. This comes ahead of Tesla's first-quarter earnings report, which will be released on Wednesday.
According to its website, Tesla has lowered the prices of its Model Y "long range" and "performance" vehicles by $3,000 each and its Model 3 "rear-wheel drive" by $2,000 to $39,990. Tesla's base Model 3 prices have dropped by 11 percent this year, and base Model Y prices have been reduced by 20 percent.
These cuts are aimed at stimulating demand as the US prepares to introduce tougher standards, which will limit EV tax credits.
The US is Tesla's largest market, and Tesla has recently lowered prices in other regions, including Europe, Israel, Singapore, Japan, Australia, and South Korea.
However, Tesla's aggressive price cuts have raised concerns about the company's profit margins, which were once industry-leading. Tesla reported a sequential increase of just 4 percent in its fourth quarter deliveries, far lower than the 17.8 percent sequential increase in the prior quarter.
This has led to predictions that Tesla will need to make more price cuts in the future as competition from rivals such as Ford and Chinese automaker BYD increases.
Despite the price cuts, analysts' average profit estimate for Tesla has fallen by about 2.4 percent in the last three months, according to Refinitiv data. For the first quarter, Wall Street expects Tesla's auto gross margin to hit a more than three-year low of 23.2 percent.
However, its revenue is expected to rise 24.2 percent year-on-year to $23.29 billion. Tesla's stock price has risen just under 50 percent this year, but the latest price cuts have caused a decline of nearly 3 percent in early trading.
However, the new strict guidelines regarding EV tax credits mean that the rear-wheel drive model only qualifies for $3,750 in tax credits. Tesla's other cars are still eligible for the full $7,500 tax credits, including the Model Y vehicles that also received a price cut.
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