Tesla shares under pressure after carmaker
announces price cuts
CEO Elon Musk postpones India trip ahead of results
expected to show worst performance in seven years
Dan Milmo
Global technology editor
Mon 22 Apr
2024 11.51 EDT
Shares in
Tesla came under pressure on Monday after the electric carmaker announced a
round of price cuts ahead of a difficult set of results for the company’s chief
executive, Elon Musk.
Tesla stock
fell as much as 5% in early trading before recovering slightly to a deficit of
3.4% in the wake of the price reductions around the globe, including slashing
the cost of three of its leading electric vehicles (EVs) and its self-driving
software.
Musk
revealed at the weekend that he had postponed a trip to India, including a
planned meeting with the prime minister, Narendra Modi, because of “very heavy
obligations” at the company.
The CEO
faces a key conference call with the investment community on Tuesday, when
Tesla’s latest quarterly figures are expected to reveal its worst performance
in seven years.
Tesla’s
results come amid slowing global demand for EVs and pressure on prices from
Chinese rivals. The company has already indicated a poor first quarter in terms
of sales, after it revealed this month that deliveries missed market
expectations by about 13%.
Tesla
attempted to boost demand for its EVs late on Friday by cutting the prices of
three of its five models in the US, then went on to cut prices around the world
over the weekend, including in China, the Middle East, Africa and Europe.
It cut the
US prices of the Model Y, Tesla’s most popular model and the top-selling EV,
and also of the older and more expensive Models X and S. Those cuts reduced the
starting price for a Model Y to $42,990 (£34,874), and to $72,990 for a Model S
and $77,990 for a Model X. It also slashed the US price of its Full
Self-Driving driver assistance software from $12,000 to $8,000.
It also
emerged on Friday that Tesla was recalling all 3,878 Cybertrucks it has shipped
since the vehicle was released in late 2023 because of a faulty accelerator
pedal. A filing from the US safety regulator said owners had reported that the
pedal pad could come loose and get lodged in the interior trim, causing the
vehicle to accelerate unintentionally, increasing the risk of a crash.
Dan Ives,
the managing director of the US financial services firm Wedbush Securities,
said investors’ reaction to the price cuts on Monday showed they were worried
“Tesla is panicking”, as well as reflecting concerns that the reductions would
hit margins – a measure of profitability.
Tesla has
already reacted to the slowdown by cutting more than 10% of its global
workforce, equivalent to at least 14,000 roles.
Musk faces
questions on Tuesday about growth in China, plans for a cheaper electric car
known as the Model 2 and whether a reported switch in focus to self-driving
robotaxis will affect the project. Shares in Tesla have declined more than 40%
so far this year. Analysts at Wedbush wrote last week that Tuesday’s conference
call represented a “moment of truth” for Musk and Tesla.
“While we
have seen much more tenuous times in the Tesla story going back to 2015, 2018,
2020 … this time is clearly a bit different as for the first time many longtime
Tesla believers are giving up on the story and throwing in the white towel,”
Wedbush wrote in a note to investors.
Reuters
reported this month that Tesla had halted development of the Model 2, prompting
Musk to post on X that “Reuters is lying”, without citing any inaccuracies.
Musk said
this weekend he would reschedule the India trip to a later date this year. He
had been due to visit on 21 April and 22 April, where he had been expected to
announce an investment of $2bn-3bn in India, according to Reuters, with the
spending plans focused on building a new plant.
Musk’s
now-postponed visit to Delhi had also been expected to include meetings with
executives at space industry startups. The billionaire is awaiting Indian
government regulatory approvals to begin offering his Starlink satellite
broadband service in the country.
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