Elon Musk's Tesla price cut comes as favorability falls among the public
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Six months after CEO Elon Musk told investors that Tesla "does not have a demand problem" — which, to be fair, might've been true at the time — Tesla now appears to have a demand problem.
Driving the news: The company overnight "dramatically" cut prices of its Model 3 and Model Y in the U.S. by a weighted average of about $10,000, or 16%, according to Evercore ISI analysts.
Why it matters: Tesla has experienced a sharp drop in its stock price over the last several months as Musk's Twitter management led to criticism of his leadership — and as the company faces rising competition with no new vehicles ready to go.
- Tesla's "net favorability" rating among consumers has fallen from 28.1% in March 2022 — the month before Musk offered to buy Twitter — to 12.8% in January 2023, according to Morning Consult Brand Intelligence survey data supplied to Axios.
The impact: The price cuts will likely juice demand but at the expense of a "significant impact" on Tesla's profit margins, Evercore ISI analyst Chris McNally writes.
- Shares of several automakers, including Tesla, General Motors and Ford, fell Friday afternoon as investors appeared to fear the prospect of increased price competition.
But, but, but: The move will make more vehicles eligible for federal tax credits under the new standards, which disqualify more expensive models from eligibility.
- "While the move will hurt TSLA's margins, we think it will undoubtedly boost sales volume and represents a significant setback for TSLA's EV competitors, as it should widen the company's competitive advantage and make many more Tesla vehicles eligible," CFRA Research analyst Garrett Nelson writes.
