Tesla Shares Drop as Musk Cuts Prices Again Ahead of Earnings

(Bloomberg) — Tesla Inc. shares fell after the carmaker cut prices in the US for the second time this month, further demonstrating Elon Musk’s willingness to sacrifice profitability for demand.

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The Austin, Texas-based company marked down each version of its Model Y sport utility vehicle by $3,000. It also cut the cost of the base Model 3 by 4.7% to less than $40,000 for the first time in years.

Tesla’s stock fell as much as 2.8% to $179.08 before the start of regular trading Wednesday. The shares are up 50% this year.

Read More: Tesla’s Price Cuts Put Lofty Valuation to the Test

This is Tesla’s second price cut in the US this month after several quarters of deliveries fell short of some analysts’ expectations. The company is in the rare position among EV makers of having profit margins to work with, as incumbents including Ford Motor Co. and newer entrants like Rivian Automotive Inc. and Lucid Group Inc. struggle to make money at lower volumes.

After several rounds of reductions, the starting prices of Tesla’s two high-volume models are substantially lower than they were to start the year. The base Model Y is 29% cheaper, and the Model 3 can be had for 15% less.

Musk has pushed back against media coverage of the cuts. “We’re not ‘starting a price war,’” the chief executive officer tweeted April 15. “We’re just lowering prices to enable affordability at scale.”

Related: Tesla Gives Buyers Reason to Wait as Prices Keep Falling

Following Tesla’s first lineup-wide price cuts in January, Musk said weeks later that orders were running at almost twice the rate of production. But the carmaker was unable to sustain that dynamic — first quarter deliveries rose about 4% from the prior three months, and Tesla produced almost 18,000 more cars than it handed over to customers.

Despite a second set of price cuts for the Model S and X in early March, Tesla delivered just 10,695 of those vehicles in the quarter, the lowest since the third quarter of 2021.

Tesla is due to report first-quarter earnings on Wednesday in the US, where investors will focus on the toll that earlier price cuts are taking on profit margins. Another concern is the extent to which legacy manufacturers are ramping up EV production and luring consumers from Musk’s limited portfolio of models, Bloomberg Intelligence analysts wrote in their preview note.

(Updates with early trading in the third paragraph. An earlier version of this story corrected the price cut percentages.)

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