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Tesla stock slides following price cuts on Model 3, Model Y

Yahoo Finance automotive reporter Pras Subramanian outlines Tesla’s decision to lower EV prices across international markets and Guggenheim analysts’ latest stock downgrade on the automaker.

Video Transcript


SEANA SMITH: Let's get to Tesla because shares are in the red today after the company announced that it's cutting prices on most of its EVs here in the US and in Europe as well. Now, the company is cutting prices by about 20% for the Model Y and 6% for the Model 3. Pras Subramanian is here to discuss. And, Pras, we talked about cuts elsewhere, specifically what-- we have seen price cuts in China. Looks like he's doubling down and extending those price cuts abroad.

PRAS SUBRAMANIAN: Yeah, you know there was inventory building up of Model Ys and Model 3s here in the States. And people thought, hey, buyers are not buying these cars because they know the price cuts are coming. They heard about it. They know it's happening because of the IRA changes. And here we are. They made the changes.

Like you said, Model Y, the performance down 20%. Some of the Model 3s down a lot, too, there. I think we have a graphic of that too. So basically, what's happening here is that they're basically bringing those prices below that IRA level for the tax credit, so that's a big incentive.

I mean, huge price cut plus an incentive like an EV credit is big for buyers, but that's going to hurt the margins pretty badly. And I think that's the concern for analysts like Dan Ives talking about how that's a big long-term-- a short-term issue, but a long-term-- it's like a way for the kind of company to kind of compete on scale versus other automakers.

DAVE BRIGGS: Yeah. And what's behind that? Why is the demand lowering a lot of factors there? Speaking of cutting prices, Guggenheim is cutting their price target on Tesla rather significantly, downgrading them to a sell. Why?

PRAS SUBRAMANIAN: Very, very bearish note here on Tesla--


PRAS SUBRAMANIAN: --just cutting that down to $89 of price target. So they see a big gross margin missed company happening in Q4, which we kind of discussed here. Possibly more price cuts coming in Europe. Demand weak. Declining waiting times is a signal of weakening demand. Plus, used cars, Tesla used cars, piling up now on different sites like CarGurus and whatnot. So that's showing them that demand-- the demand problem is real and after the price cuts are here.

But they said, bottom line, Tesla had to sacrifice one or two things, growth or gross margins. And they decided to take gross margins. So they're taking that down, and that's sort of the issue now. And are we going to value that automaker as, like, a-- sorry-- value Tesla as a regular automaker going forward?

DAVE BRIGGS: And the other automakers took a beating today, which was interesting. I don't know if-- do you feel like it was related? I mean, it was surprising to see Ford take a pretty significant hit about the same time.

PRAS SUBRAMANIAN: Definitely. This is the beginning of a big price war. I think this is the-- 2023 will be the year that you can get a cheap EV because this is going to be-- they're going to be competing on price because the cars are all pretty good, right? So the the question is, can I get that cheaper? Can I get that model that I want right now? And if the price is $7,500 cheaper, I mean, there you go.

SEANA SMITH: Yeah. And some of the other automakers, some of the competitors out there, might be forced to lower their prices because of Tesla now lowering prices. I don't know. It'll be interesting to watch. But really, we saw losses across the board today. Pras, thanks so much.