Tesla Inc shares fell nearly 7% on Monday, dragged down by growing worries about the electric-vehicle maker's profit margins after aggressive price cuts led to only a modest increase in quarterly deliveries.
After slashing prices on its vehicles by as much as 20% in January, Tesla posted record deliveries of 422,875 vehicles in the first quarter, but that was just 4% higher than the prior quarter.
Several analysts said the figures raised questions about whether more price cuts would be needed this year to achieve CEO Elon Musk's target of 2 million deliveries for 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."
Tesla shares were trading at $195, having gained 9% last week in the run-up to the deliveries report.
Supply-chain and logistics snags also remain in a flux for the EV maker, analysts noted.
"Anything is possible with the supply-chain challenges," said Roth Capital analyst Craig Irwin.
Elsewhere, most top global automakers reported a rise in first-quarter U.S. sales on improving shipments to dealers, data showed on Monday. General Motors Co grew sales by 17.6%, while Asian peers Mazda, Honda and Hyundai also reported growth.
Although Tesla's price war has pressured money-losing EV startups such as Rivian Automotive Inc and Lucid Motors and legacy automakers including Ford Motor Co, it has also raised fears about the company's industry-leading margins.
Bernstein analysts said Tesla "will need to further lower prices this year and/or next year to achieve its volume targets, incrementally pressuring margins."
"We maintain that price cuts have and will undermine industry profitability (including Tesla's), but that incumbents are deep-pocketed and not likely to back down," they added.
Some analysts, however, pointed out that the falling prices of materials used in EVs, especially battery metal lithium, could help lower the cost of production and offset the hit from price cuts.