Tesla shares skid after huge price cuts fail to turbocharge demand

Tesla shares skidded lower after aggressive price cuts led to only a modest increase in sales.

The electric car maker said it delivered a record 422,875 vehicles in the first quarter of the year, up just 4 per cent on the previous three months.

It came after Tesla and boss Elon Musk slashed prices by as much as 20 per cent in January in a bid to boost demand despite the impact on profits.

Analysts said the figures raised questions about whether more price cuts would be needed this year to achieve Musk’s target of 2m deliveries in 2023.

‘Tesla’s price reductions are clearly having the desired effect for now, but there’s a limit to how many times prices can be cut,’ said Sophie Lund-Yates, an equity analyst at Hargreaves Lansdown.

‘With delivery targets for the year looking slightly tough to achieve, there could yet be further pressure on the group’s valuation despite its sharp falls in the last couple of years.’ Tesla shares, which peaked above $400 in late 2021 but were close to $100 early this year before bouncing back, fell around 6 per cent to $194.

Although Tesla’s price war has put pressure on money-losing electric vehicle (EV) start-ups such as Rivian Automotive and Lucid Motors as well as traditional rivals including Ford, it has also raised fears about the company’s industry-leading margins. 

Analysts at private wealth manager Bernstein said Tesla ‘will need to further lower prices this year and/or next year to achieve its volume targets, incrementally pressuring margins’.