Tesla prices continue to fall, giving car buyers a good reason to wait

Tesla's stock is a buy and heading back to $300, while another thinks it's a sell and will fall to $150.

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However, Alexander Potter, who works for Piper Sandler, Toni Sacconaghi, who works for Bernstein, and analysts who are more neutral about Tesla are all of one mind: The company's electric cars will only get cheaper in the future.

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In response to Tesla's decision last week to cut prices across its US lineup again, as it announced late Thursday evening after many had signed off for the Good Friday holiday, that was the overall reaction Tesla received from its customers. There is a new base model of Model Y now available for $49,990, which is 24% less expensive than the least expensive iteration of the SUV that was introduced earlier this year. Aside from that, the company has marked down the prices of its oldest cars by as much as $34,000.

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Potter wrote in a report published on April 10 that investors should expect Tesla's relentless price cuts to continue, as the carmaker seeks to accelerate the demise of gasoline-fueled vehicles. "There is no denying that price cuts are a headwind for margins, but we believe they are more problematic for Tesla than they are for its peers, because of industry-wide affordability concerns and Tesla's superior cost structure."

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There was less optimism about the possibility of a profitability compromise on the part of the automaker from Sacconaghi.

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"It's without a doubt a clear demonstration of Tesla's desire to stimulate demand with these price cuts, which represent a clear trade-off between margin and volume for Tesla," Bernstein's technology analyst wrote in a research note. "We don't believe this will necessarily be the case in Q1, even though many investors have expressed an opinion that Q1 margins may have bottomed out, especially given our belief that further cuts are likely in the near future.”

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In a nutshell, analysts' predictions about more price cuts proved to be prescient in the short term. It has been reported by the Hong Kong Economic Times on Wednesday that Tesla is planning to cut the price of most versions of its Model 3 and Y vehicles sold in the territory by up to 15%.

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While market prognosticators are arguing about whether Tesla should be on offense or defense, it's important to take a step back and think about what consumers are thinking about when they're considering buying a Tesla vehicle. Considering recent events, how many people are going to hold off investing after these past few months, thinking they'll be better off waiting for a better deal to come along?

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Tesla CEO Elon Musk has not made any promises as to when the company will stop cutting. As a matter of fact, he has alluded to the fact that the company is limited in its ability to sell as many cars as it wants at the prices it has been charging.

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Last week, Musk tweeted that there is plenty of demand for his products. "However, if the price is higher than the people can afford, then demand will not be a factor."

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It was a familiar refrain from the chief executive officer, who stated in his mission statement that he purposed to accelerate the transition to sustainable energy. If Tesla's vehicles continued to cost as much as they do today, it would seem impossible to speed up the transition to EVs when the cost for your vehicles is the same as that of Tesla's.

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It is worth noting that Musk's comments are not meant to imply that Tesla's supply-demand dynamics are any longer in its favor, as they have been for the past several years. Rather, Musk's comments are an acknowledgment that demand dynamics are not in its favor anymore as they were. While supply-chain constraints seem to be easing, it appears that the company is succumbing to the same pressures that the rest of the industry is also feeling to lower prices as a result.

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It was announced on Tuesday by Cox Automotive that new cars are now selling at prices lower than the suggested retail prices set by manufacturers once more following shortages of chips and other issues that had knocked the market for a loop.

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Cars Are Selling for Less Than a Sticker Again

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In the first quarter of this year, Tesla delivered more than 422,000 cars but produced more than 440,000 cars. Having said that, Musk will be back in the position to discuss demand when the company reports quarterly earnings one week from today due to the mismatch - something to do with cars being in transit at the end of the quarter.

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"It is essential to improve affordability in order to become a multimillion vehicle manufacturer in the future," Tesla stated in its last shareholder deck in January. "It is because of our constant dedication to cost control and cost innovation that we believe we are better able to navigate our way through 2023, and ultimately succeed in the long run than any other OEM on the market."