Tesla has announced price cuts for its Model 3 and Model Y EVs in Japan as investors weigh the outlook for profit margins after stronger-than-expected second-quarter deliveries. With production still running slightly ahead of deliveries, some analysts have warned of further potential price cuts. TSLA stock rose slightly Wednesday stock market action after shares closed at a nine-month high on Monday.
Tesla announced roughly 3% price cuts for a Model 3 versions and about 4% for Model Y versions in Japan. Higher-priced Model S and Model X vehicles were unchanged.
Telsa Q2 Deliveries Outpace Production
Tesla stock surged 6.9% on Monday after reporting 466,140 EV deliveries in Q2. That topped Q1's company record 422,875 and estimates of around 445,000. Model X and Y deliveries accounted for 446,915, or 96%, of the total.
Meanwhile, total production hit 479,700, only narrowly topping deliveries.
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The small rise in inventories gave some analysts confidence that Tesla would need only limited price reductions going forward, which would be good news for profit margins. Goldman Sachs analyst Mark Delaney raised his TSLA stock price target to 275 from 248 on optimism of more benign price declines. However, Barclays analysts kept a 260 price target and equal weight rating, saying questions remain about where the "margin floor" is for Tesla.
Tesla is set to report Q2 earnings after the market close on July 19.
Tesla Discounting
The EV giant had been working to move inventory before the end of the quarter, offering discounts and deals running through the end of June, especially on inventory vehicles
In mid-June, the EV giant began offering customers who ordered a Model 3 between June 14-30 three months of unlimited free supercharging, according to the company's website.
In China, Tesla once again offered insurance subsidies on Model 3 vehicles. Costumers in China who buy and complete delivery of an inventory Model 3 rear-wheel drive vehicle before the end of June will be eligible for an insurance subsidy of about $1,120, according CnEVPost.
Tesla also got all Model 3 vehicle trims eligible for the full $7,500 tax credit under the Inflation Reduction Act (IRA) in early June. Tesla's Model 3 and Model Y vehicles all qualify for the $7,500 tax credit.
Nissan Leads Japan EV Market
While the limited price cuts in Japan might be seen as a negative for the Tesla margin story, keep in mind that Japan's EV market is hardly a bellwether. EV sales only made up 2%-3% of auto sales in 2022. Minicars make up more than half the total, fueled by sales of Nissan Motor's Sakura. Nissan's Leaf also is a top seller.
Nissan stock has some momentum for the first time in ages, clearing an 8.27 buy point on Monday, according to a MarketSmith analysis.
TSLA Stock
TSLA stock rose 0.95% to 282.48 in Wednesday trade. Tesla is well extended past a 207.79 buy point.
