During Monday's premarket session, the shares of Tesla turned lower after the EV maker introduced yet another price cut.
This is the 5th time since Tesla has introduced price cuts to its electric-powered vehicles. Although this is good news for the consumers & will also make Tesla more competitive in the EV market, it had a negative effect on its share price.
As far as the investors are concerned, they believe that these rate cuts introduced by Tesla are eating away at the company's profit margins.
According to official sources, Tesla has slashed the price of the Model 3 Sedan by $1000. Similarly, the price of Model Y Crossover is also slashed by $2000!
And the most expensive car model of Tesla, dubbed as 'Model X' and 'Model S,' has also benefited from the price reduction. As per the reports, these expensive car models are now $5000 cheaper!
The price cuts had come at a time when Tesla delivered close to 423000 cars during Q1 2023. And if we look at Tesla's internal guidance, it is planning to deliver close to 2 million cars in 2023 alone.
However, analysts believe that the car deliveries made by Tesla will be 10% lower than the company's estimates.
Analysts believe that Tesla's decision to introduce rate cuts is an attempt to accelerate sales growth! In simple words, the company was now offering cars at a much lower price than a few months ago.
However, this rapid introduction of rate cuts could put the company's profit margins at risk! In fact, Wall Street analysts believe that Q1 2023's auto gross margin will only be around 21.1%.
But if the company manages to sell more cars in 2023 than in the earlier years, then it could make up for the lost profit margin by selling more volume! However, that remains as there are still three more quarters to go!