Tesla shares skid after huge price cuts fail to turbocharge demand

Tesla shares fell after aggressive price cuts led to only a modest increase in sales.

The electric car maker said it delivered a record 422,875 vehicles in the first quarter of the year, up just 4 percent from the previous three months.

It came after Tesla and boss Elon Musk slashed prices by as much as 20 percent in January in a bid to boost demand despite the impact on earnings.

Analysts said the numbers raised questions about whether more price cuts would be needed this year to meet Musk’s target of 2 million deliveries by 2023.

“Tesla’s price cuts are clearly having the desired effect for now, but there is a limit to the number of times prices can be cut,” said Sophie Lund-Yates, equity analyst at Hargreaves Lansdown.

“With the supply targets for the year looking somewhat difficult to meet, the group’s valuation could come under further pressure, despite the sharp declines in the past few years.” Tesla shares, which peaked at more than $400 in late 2021 but reached nearly $100 early this year before bouncing back, fell about 6 percent to $194.

While Tesla’s price war has put pressure on cash-losing electric vehicle (EV) start-ups like Rivian Automotive and Lucid Motors, as well as traditional rivals including Ford, it has also raised fears for the company’s industry-leading margins.

Analysts from private asset manager Bernstein said Tesla “will have to cut prices further this year and/or next year to meet its volume targets, putting margins under incremental pressure.”