Tesla sparked off an electric vehicle price war early this year. Since then it’s cut prices some five times but analysts believe that it’s not done yet. New Q1 financial results coming later this month should paint a clearer picture of Tesla’s long term position.
Cutting prices might be underselling what Tesla did in January. Globally it slashed those prices by up to 20 percent depending on the model and configuration. That immediately sent a number of companies into a similar process as each one attempts to stay competitive in the space. As prices fall though, so too would margin typically.
“Make no mistake — the price cuts reflect Tesla’s need to stimulate demand and are an explicit trade-off of margins for volume,” Toni Sacconaghi of Bernstein’s said to MarketWatch. “While many investors have been hopeful that [first-quarter] margins might be bottom, we don’t believe that will necessarily be the case, particularly given our belief that further cuts are likely.”
Read: Tesla Drops Prices Across U.S. Lineup For Fifth Time This Year
Just this year Tesla has dropped pricing on the brand’s flagship cars, the Model S and Model X, by $15,000 or more. It’s also offered a shorter-range Model Y for a lower base price and just dropped the price of the Model 3 sedan by $1,000. Continuing to drop prices even further would likely increase demand and at the same time put even more pressure on rival automakers in the industry, most of which are nowhere near catching Tesla.
The first-quarter financial results coming next week should say a great deal about how Tesla is faring overall. Analysts say that weak margins, anything under some 21 percent, could indicate that indeed, Tesla has a demand issue on its hands. Stronger margins would indicate the opposite though. It’s possible that Tesla is indeed leveraging its cost position to increase margin overall.
We’ll know more when those results come out on April 19th after the market closes. Until then, it seems like a decent time to pick up a new Tesla but waiting might prove even more lucrative.
