Reply To: Tesla Reports Optimistic Outlook with Record Revenue and Orders


On Friday, the automaker cut prices on all US models, with Model 3 and Model Y sticker prices sliding by at least $1,000 while Model S and Model X prices fell by $5,000 or more.

Bernstein analyst Toni Sacconaghi indicated that the price cuts were not surprising given elevated inventory levels, “but the timing and details (early in the quarter; in the US price; including the Model Y)” caught him off guard.

“We believe additional price cuts in other geographies are likely,” he told clients. “The fact that Tesla is cutting price on its longest lead time model suggests other price cuts are likely to follow, particularly since Model 3 SR rebates will fall $3750 on 4/18, and competition continues to intensify. Make no mistake – the price cuts reflect Tesla’s need to stimulate demand and are an explicit trade off of margins for volume.”

As such, he does not see a bottom for margins in the near term and will “undermine industry profitability” as other automakers are forced to match Tesla’s actions. Assessing the overall auto industry, Sacconaghi said that “incumbents are deep pocketed and not likely to back down” in the face of Tesla’s price cuts.

“Some investors maintain that Tesla’s recent price cuts reflect a structural cost advantage that will enable it to pressure rivals and capture outsize volume and dominate the EV market,” he acknowledged. “Ultimately, we believe that the automotive market is hyper-competitive, and very difficult for any OEM to sustain an ongoing competitive cost advantage.”

Sacconaghi assigned the stock an Underperform rating and a $150 price target on Tesla (TSLA).