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Tesla is both offensive and defensive in a price war


There are several ways to look at Tesla deeply cuts prices in the US and Europecame after two price drops over a 10-week period in China.

To the crowd that’s already half-empty of a glass, it’s clear the automaker is struggling to garner orders. The company produced 34,000 more cars than it delivered in the fourth quarter — not a catastrophic difference, but part of a trend that isn’t like Tesla. After all, the CEO Elon Musk told investors in October that the company expects to sell every car it can produce, “in the future as far as we can see.”

TeslaToni Sacconaghi, a Bernstein analyst with the equivalent of a sell rating on the stock, wrote to clients Tuesday. “While we (and many investors) had expected price drops, they were larger and came sooner than we expected.”

For the half-full team, Musk has just begun a price war that Tesla has a high chance of winning, even if emerging unscathed is unquestionable. According to a projection, the cuts can Increase sales by 53% and overall global demand increased by 12% -14%although moving yes anger some existing customers.

There’s no question about cutting your costs by 20% Model Y and create performance versions of Model WILL and X is about $20,000 cheaper, which will put pressure on profits. But Tesla is clearly making more money than other EV companies, and with the exception of China’s BYD, no other automaker can produce as much. Electric Car.

“Tesla has a higher profit margin than other OEMs including GM and FordJohn Murphy, a Bank of America analyst with a rating equivalent to a hold on the electric vehicle maker’s stock, said Tuesday. “Most OEMs are currently at a loss on EVs and this price drop could make it harder to do business, like they’re trying to ramp up production of EV products. OEMs will have to reassess their investments and whether they will generate enough returns if EV prices prove less favorable.”

Tesla almost went bankrupt during the Great Recession that was taking place about 15 years ago. The company then grew in part thanks to long-term low interest rates, easy access to capital, and less competition.

That’s all change. The Federal Reserve’s rate hike has increased borrowing costs, and Tesla is no longer the only game in town. BYD is growing strongly in China, volkswagen was fighting to defend its territory in Europe, and Ford and common engine do the same thing in America

Musk is determined to position Tesla for continued expansion after the company fell short of its growth target in vehicle deliveries last year. Cut the price of 3 . sample and Y will make many of those models eligible for new US tax credits offered by the Inflation Reduction Act.

In a Twitter Spaces chat last month, Musk predicted a severe recession this year and warned consumers to cut back on expensive purchases. He called higher interest rates and lower demand a “double pain,” and said Tesla faced a choice.

“You want to increase the unit volume, in which case you have to adjust the price down? Or do you want to grow at a slower rate, or at a steady rate?” Musk asked rhetorically. “My bias would be to say let’s grow as fast as we can without putting the company at risk.”

In that scenario, Tesla’s CEO said profits would be “below negative” during a recession, provided their cash position remains strong.

“I think it’s still the right move, in the long run,” Musk said.



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