Tesla Shares fall as Prices are Lowered Across Lineup

Jan 2
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In an SEC filing, Tesla updates public on price cuts and action to combat tax credit reductions.

$2000 Price Reduction in the U.S.

It was public knowledge that the tax credit offered to electric vehicle owners was going to be phased out, as of January 1st 2019 the credit fell from $7500 to $3750. Tesla (NASDAQ:TSLA) in a move to maintain sales has absorbed some of the cost difference with a broad price reduction of $2000 across their lineup. As time progresses, the credit will continue to fall in the U.S. In an ideal scenario for Tesla they can improve their efficiency at an equivalent or greater pace than the government credit declines, but this seems unlikely based on recent earnings and production levels.

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Vehicle Deliveries

In 2018 Tesla managed to deliver 245,240 vehicles to customers with an approximate mix of 60% Model 3’s and 40% being Model S and Model X. This is more vehicles than all previous years combined for Tesla. Q4 specifically saw over 90,000 deliveries, with the production of roughly 87,000 vehicles. In Q3 Tesla noted that they had trouble delivering vehicles, but had solved the problem, as evidence that deliveries outpaced production in Q4. The production goal was to hit 1000 vehicles per day, which has almost been achieved, with the expectation that it will easily hit this mark in early 2019.

 

2019 All About Efficiency

In 2019 credits will continue to expire and rebates will be lowered, it’s unclear if Tesla plans to lower the cost of their vehicles again, or expects customers to absorb the cost as they partially have to currently. The profit margins for the Model 3 may not have much room to move without an increase in the efficiency of manufacturing and delivery of vehicles. There is still a long wait list for a Model 3, especially when selecting the lower priced models, which is a good sign for Tesla as they can focus solely on production and deliveries. Tesla has $9 billion in debt to be paid back before the end of 2025, putting pressure on them to increase their profits sooner than may be in the best interest in the long run. Debt has always been high for Tesla though with Elon musk admitting they were a few weeks away from bankruptcy in 2018 as they were ramping up Model 3 production.

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Q4 Financial Report

Tesla has provided good insight today into their Q4 earnings, and as a result, the stock has fallen 7% as of writing. However Tesla stock has always been highly volatile around Model 3 targets. In a few weeks, we’ll have their Q4 earnings which will tell a more complete story of how deliveries and profit margins look.

 

 

Source: Tesla Investor Relations

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