Tesla’s Lower Than Expected Model 3 Deliveries, Price Cuts Cause Shares To Fall

Tesla saw its shares fall by over 9 percent after announcing its Model 3 deliveries for the fourth quarter and price cuts for the entire range in the U.S. as an offset to the tax credit reduction.

The Palo Alto-based EV maker delivered 63,150 Model 3s in the fourth quarter of 2018, falling short of the projected 64,900-unit estimate by FactSet, thus disappointing Wall Street, as reported by Reuters.

Elon Musk is under intense pressure to deliver on his promise for a more stable production output, with Tesla announcing that it was building almost 1,000 cars per day.

Tesla’s $2,000 price cut, however, led share prices drop by 9.4 percent on Wednesday, as Wall Street took it as a sign of weakness now that the federal tax credit is reduced.

“The price cut is what’s driving the stock lower, as it openly acknowledges the sunset of subsidy dollars is a material headwind,” Craig Irwin, an analyst with Roth Capital Partners, said.

As Tesla has already sold 200,000 vehicles, the government will reduce the tax credit by 50 percent every six months until it’s finally phased out. The car maker has urged customers to make use of the subsidy, with even Musk reminding them on his Twitter that the benefit would drop to half at the beginning of 2019.

Tesla’s overall 2018 deliveries rose to 90,700 cars, but missed the forecasts, which were partially influenced by the expectation of a surge in buyers looking to take advantage on the tax credit before the year ended. Tesla’s production was increased by 8 percent in the fourth quarter to 86,555 vehicles, with 61,394 of them being Model 3s.

“Tesla disappointed the market. The deliveries are below our estimates and the consensus estimates. I don’t expect that Tesla operates in the black in 2019,” Frank Schwope, an analyst with NORD/LB said.