Tesla is trying to pivot a big part of its strategy at a time when demand for electric vehicles is threatened by a slowing economy and ever-greater competition. “We basically adjust our prices to match demand,” Musk said in an interview Tuesday with CNBC. “All car companies make a significant price adjustment… It’s just that Tesla is so immediate, clear and transparent. [that] it’s not a question about MSRP [manufacturer’s suggested retail price]or model and discount.” From January through April, Tesla slashed prices at least six times on both the Model 3 and Model Y. Its goal was to entice consumers to take the leap towards the brand. The company’s stock has risen, hopefully, at a lower price. Hopefully that will do enough that the sales volume will make up for the lower profit it makes per car. over 46% since the start of 2023, but the stock traded lower after the company reported earnings. Since then, the stock has fallen 2.3%. is to decrease gross profit margin [gross profit margin] when the company notes that it is willing to lower prices and accept lower GPM to expand use of TSLA vehicles and sell FSDs [full self-driving] and other services,” Truist said in an April 21 note, in which the company downgraded Tesla stock to retain from the purchase. In part, Tesla’s success will depend on demand for the company. S&P Global predicts that the combination of battery electric vehicles, plug-in hybrid electric vehicles and fuel cell electric vehicles will account for about 47 percent of cars on the road in the US by 2030. But in the near-term, electric vehicle demand will be pinched by the height of the global economic crisis, the energy crisis in Europe, China’s adjustment of electric vehicle subsidies, high inflation as well as worries Concerns about the potential for a recession in the US. The outcome. These analysts expect equities to remain under pressure until investors have a better understanding of how the situation plays out.” Goldman Sachs analyst Mark Delaney said in a research note published May 14. Still, the market is bullish. The International Energy Association expects 14 million electric vehicles to be sold globally by 2023. About 13% of those will be Tesla vehicles, if the company hits its 1.8 million production target and sell everything they produce. Find an ‘irresistible’ price Tesla’s price cut is an attempt to take advantage of that burgeoning market. The company was focused on widespread vehicle adoption and needed to find a suitable price point for its best-selling products — the Model 3 and Model Y . “Most companies, such as a traditional manufacturer, will seek to maximize profit, which does not maximize ASP. [average selling price] It’s also not about maximizing units,” said Will Stein, a senior analyst at Truist.”[The balance] is understanding the balance between the two and understanding that at some point, as you continue to lower prices, you may not be able to stimulate more demand.” , 2022. March 2023, rates gross profit fell to 19%, down nearly 16% from the previous quarter, in June. “The core of the bull/bear debate is: When will the Tesla price cut end and profit margins? What will it look like on the other side of this cycle as we head into 2023 in a tough macro?” Dan Ives, senior Equity Research Analyst at Wedbush wrote in a note today. Thursday, 2022. In April, however, after investors reviewed the company’s quarterly results and commented on further tightening of margins, Tesla shares fell nearly 15% Philippe Houchois, executive director of automotive research at Jefferies said: “The data shows that demand has not maintained at the level that Tesla would like at current prices. For now, Tesla may be ready to cut prices. until he found a selling point that was truly “irresistible” to customers, he added. There’s another issue, according to Cox Automotive executive analyst Michelle Krebbs, “…how do you actually measure demand?” She explains that Tesla sales data is harder to obtain because customers buy directly from the company instead of dealers. Tesla does not publicly disclose the number of vehicles it sells. Instead, it refers to deliveries – a number that doesn’t specify the region the cars will arrive in or the specific model of car sold. In the company’s latest quarterly earnings report, Tesla said it delivered 422,875 vehicles. According to FactSet, this is lower than the 432,000 vehicles that analysts expected. Despite the shortfall, Musk reiterated his goal of a total of 1.8 million deliveries this year. “We have real-time information on demand, so we know how many people ordered Tesla yesterday,” Musk told CNBC on Tuesday. “Literally every day we get an automated email sent to the operator telling us how many people have ordered, in which countries, [and] for what cars.” Musk didn’t expand on demand today.If Tesla cuts and raises prices to keep up with demand, continuing price cuts are perhaps the clearest — and loudest, signal yet. – that demand is not where the company wants to be. “You don’t want to overreact to these things, because sometimes you get mitigated for inexplicable reasons,” he said of the fluctuations he looks at see. Tesla versus Ford. There are broader implications as well.” “Tesla’s price cuts signal that traditional automakers will eventually need to reduce the price of electric vehicles to levels that aren’t much higher than engines,” said Seth Goldstein, equity strategist at Morningstar. equivalent internal combustion”. In terms of pricing, the entry-level luxury and premium segments will need to be priced closer to that of the internal combustion engine to attract consumers.” on May 2 reduced its sticker by about $1,000 to $4,000, bringing its price between $42,995 to $59,995.Tesla raised the price of both the Model 3 and Model Y in the same space. day to around $250. With this change, the Model 3 is now selling for $40,240 and the Model Y is around $47,240 in the US Ford’s price cut doesn’t help its situation. It’s working. Ford shares are down slightly since the start of the year, largely due to the heavy burden of electric vehicle investment.The automaker is pouring billions of dollars into development. electric vehicle development and production, while losing money on every electric vehicle they produce. “We’ve written a lot about the resistance that EVs have on returns to legacy. [original equipment manufacturers] and the impact of EV price deflation. We believe Ford (and other legacy OEMs) will continue to evaluate their electric vehicle plans, and management of F. Adam Jonas, Morgan Stanley equity analyst said in a note today. May 2 to Ford. However, traditional automakers have no choice. Goldman Sachs expects electric vehicles to account for 12% of total sales this year. to 17% by 2025 and 50% by 2035. Krebbs said the valuation situation may not have a broad impact. I see it as a price war against the main competitors, because Tesla doesn’t compete in every segment,” Krebbs said, adding that the price cuts are an attempt for Tesla to maintain market dominance. market and prevent competition from big rivals like Ford She said: “Ford’s Mustang Mach-E is in Tesla’s sights. CEO Jim Farley has warned that Ford will only go so far in cutting prices to catch up with Tesla. He affirmed that demand remains strong when talking to investors about the company’s latest quarterly earnings call.”…We feel great about demand. [for the Mustang Mach-E] otherwise we wouldn’t have doubled production this year,” he said. A more crowded market, Tesla lost market share as a new batch of electric vehicles hit the market, according to S&P Global. 2021, a wide range Among automakers – including Volvo, Cadillac, Mercedes and BMW – no electric vehicle trademarks have been registered in the US.A year later, 10,390 electric vehicles have been registered since various manufacturers, told Citigroup on Wednesday that the number of electric vehicle models will grow from 74 in the U.S. to 113 in 2024 and to 151 in 2025. The rise of new models is bringing in consumers new users into the electric vehicle segment. More harm than good if they end up turning consumers away.” Over the next few months, [if] Tesla continues to cut prices [and] “I don’t know if that’s a big deal, but I think it’s a more common problem with this pricing strategy,” says Stein. ” Krebbs concurs, adding that EVs “price as confusing as the price of an airline ticket, which changes all the time,” which could “mark buyers who bought a Tesla at one price and it would drop shortly after.” that.” According to Houchois, the electric vehicle maker is higher year-to-date despite driving lower margins and higher vehicle output. The loudest reaction I’ve ever heard was, ‘I wonder if he has [Musk] “I hope he’s setting a low standard,” Stein said.