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- Tesla announced record-breaking Q1 deliveries, with 422,875 vehicles.
- Analysts warn that price cuts alone won't stop competition.
- Even though Tesla deliveries are increasing, Tesla excesses continue to mount.
After reporting a 36% increase of sales, Elon Musk's plan for increasing demand for Tesla cars with price reductions seems to be paying off.
This record-breaking quarter-end delivery report comes after Tesla took price reductions and other incentives over the past few months. Some investors were concerned that this would negatively impact the company's profit margins.
Others analysts and industry experts wondered at first if Musk was using price reductions to turn Tesla's lack of demand into an advantage over his competition.
After Tesla reported that it sold 422,875 vehicles during the first three months in 2023 – the majority of which were from the Model 3 and Model Y – Ryan Brinkman, a JP Morgan analyst said that Musk's move appears to have paid off so far.
"We note that a +20% demand response appears necessary to offset the effect of a price reduction of -10%," Brinkman wrote Monday in a note to clients. He noted that Tesla's delivery estimates for this year are still low because it faces unique industry challenges such as higher interest rates and increased competition.
Tesla aims to produce 2 million vehicles this year, almost doubling its 2022 production.
Investors continue to prioritize Tesla design updates.
Tesla is well on its way to becoming the mass producer of EVs Musk promised it would be with these impressive delivery figures. Analysts warn that price reductions alone will not be enough to halt competition.
Emmanuel Rosner, Deutsche Bank analyst, stated that the company will need to make design changes on the Model 3 & Model Y vehicles in order to be competitive, particularly in the highly-important Chinese EV market.
Rosner stated that "Longer-term, we believe that Tesla will deepen its competitive moat as it executes its cost and efficiency initiatives on the next generation platform, and the company's lead in electrification space."
Tesla stock fell 6.4% to $194.22 per Share in mid-morning trades
Tesla has opted for over-the-air updates to improve and change the Tesla driving experience, and not costly redesigns or model-year changes. This has been done for many years. However, as Teslas become more commonplace, analysts warn that Musk will have to refresh the look of his electric vehicles.
After increased deliveries, Teslas still pile up
Tesla also reported Q1 production at 440,808 vehicles. This is a significant gap in production and deliveries, despite an increase in quarter sales. This is a problem that many EV startups have had to deal with since they have abandoned the traditional dealer model.
Tesla's production has outpaced deliveries four times in a row for the fourth quarter. This is a sign that some analysts believe it means that there is still a deeper demand problem.
Philippe Houchois, a Jefferies analyst, stated in a note that "Continued excess production will continue the debate on price elasticity against general demand weakness."
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By: nnaughton@insider.com (Nora Naughton)
Title: Elon Musk’s price cuts at Tesla are working – for now
Sourced From: www.businessinsider.com/tesla-price-cut-helped-bolster-demand-q1-deliveries-market-share-2023-4
Published Date: Mon, 03 Apr 2023 16:07:59 +0000
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