Bahrain
Kuwait
Oman
Middle East
GDN Online App available on
App Store / Play Store
Gulf Daily News Gulf Daily News
Gulf Daily News Gulf Daily News Gulf Daily News Gulf Daily News Gulf Daily News
Wednesday, January 23, 2019 ARCHIVES  |  SEARCH  |  POST ADS  |  ADVERTISE  |  SUBSCRIBE   |  LOGIN   |  CONTACT US

Tesla cuts prices of all US cars

International Business
Thu, 03 Jan 2019


NEW YORK: Tesla shares dropped as much as nine per cent yesterday after the electric carmaker cut US prices for all its vehicles to offset lower green tax credits and fell short on deliveries of its mass-market Model 3 sedans in the fourth quarter.

The price cut “naturally begs the question: If demand for Tesla vehicles is as strong as Tesla has indicated in the past, why cut price?” Bank of America analyst John Murphy wrote in a client note. “In our view, this move could suggest that what many bulls assume to be a substantial backlog ... for Tesla may be less robust.”

Tesla turned a profit for the third quarter but is unprofitable for the first nine months of 2018, and cash flow remains a concern for investors.

Chief executive Elon Musk is under intense pressure to deliver on his promise of stabilising production for the Model 3, which is seen crucial for easing a cash crunch and achieving long-term profitability.

Musk, who has often set goals and deadlines that Tesla has failed to meet, surprised investors by delivering on his pledge to make Tesla profitable in the third quarter, for only the third time in its 15-year existence.

Tax credits on its vehicles contributed to that profit. The news also comes as carmakers and analysts expect US new vehicle sales to weaken in 2019.

Tesla said it was churning out almost 1,000 Model 3s daily, broadly in line with Musk’s promises but slightly short of Wall Street expectations.

But the price cut of $2,000 on the model took the market by surprise and weighed on the stock, pushing it down in morning trade.

Under a major tax overhaul passed by the Republican-controlled US Congress in 2017, tax credits that lower the cost of electric vehicles are available for the first 200,000 such vehicles sold by a carmaker. The tax credit is then reduced by 50 per cent every six months until it phases out.

Tesla delivered 63,150 Model 3s in the quarter, falling short of FactSet estimates of 64,900.

Total deliveries rose from the third quarter to 90,700 cars, but missed forecasts, which had been influenced by analysts’ expectations of a surge in buyers looking to cash in on the tax credit before year-end.

Tesla’s third-quarter pre-tax profit was around $3,200 per vehicle delivered, but for the first nine months of 2018 the company suffered a third-quarter loss per vehicle delivered of $8,019.

Overall, total production rose 8pc to 86,555 vehicles. The company churned out 61,394 Model 3s, up from a total of 53,239 Model 3s in the third quarter.