According to Bernstein, Tesla needs to cut prices amid falling demand this year — and that may not be the end of future cuts. Analyst Toni Sacconaghi, a longtime speculator at the electric-car maker, reiterated his underperforming assessment of the stock and lowered his estimates for the fourth quarter and 2023, noting that the company needs to reduce prices further to boost demand. “Tesla seems increasingly to have a demand problem,” he said in a note to customers. “The company responded by lowering prices in China and the US (for December deliveries) and intentionally reducing production in China.” The current cuts in China and the US have reduced the average selling price by about $1,400, or 2.6%. Sacconaghi attributes the slide in demand to increasing competition from electric vehicles and the company’s “expensive” and “narrow” product line. He said the uncertain economic backdrop, which keeps consumers from buying expensive items like cars amid inflationary pressures, is also holding the company back. Sacconaghi added that there could be more price cuts in 2023 to stimulate demand in China, while cuts in the US would also need to be made to qualify for the Rebates Act rebates. inflationary. It’s likely the average price will drop to around $50,000 from $53,000 in the US in the third quarter of 2023, he said. A launch of the lower-priced SR Model Y in the US is also possible, he said. But Sacconaghi also said there are potential variables that could help cushion the loss from a drop in prices. Improved margins of about $900 per car in Texas and Berlin, as well as reduced production costs, improved operating cost leverage, and IRA credits, could all help offset from 2,000 up to $3,600 for the discount. As a result, however, Sacconaghi’s prospects have weakened. He said the fourth quarter should bring in $25.3 billion in revenue and $1.17 in earnings per share, placing both below consensus expectations. Meanwhile, the full year should meet similar expectations, with him expecting revenue at $111 billion and total earnings per share of $4.96 for the year. The analyst has a price target of $150 per share on Tesla, implying a 16% drop from Tuesday’s closing price. — Michael Bloom of CNBC contributed to this report.
