Tesla looks set to raise Model Y prices across all its key sales regions next month in what many analysts see as a gamble to drum up additional first-quarter sales with the EV giant heading toward a likely delivery miss. However, it remains to be seen whether customers will snap up Tesla vehicles in March or call the company's bluff. TSLA shares advanced Wednesday.
Tesla is reportedly increasing Model Y prices in China on April 1, according to local media reports Wednesday. The move comes after the EV giant already announced plans for Model Y price increases in Europe and the U.S., beginning on March 22 and April 1, respectively.
Tesla is expected to increase the Model Y price by $700 in China on April 1. However, with current insurance subsidies and other deals set to expire this month, the actual price increase will be around $3,200, according to China media reports. China's economy, which has been ailing for years, is showing signs it could be firming up with possible demand growth in 2024.
Meanwhile, the global EV giant is also currently offering inventory discounts between $1,000-$1,500 for Model Y trims in China.
Tesla over the weekend said it will increase the price of all Model Y trims in the U.S. by $1,000 next month while Model Y prices in Europe will go up by around $2,100 on Friday.
The pricing move comes after Tesla, to maintain sales momentum, has aggressively cut vehicle prices and offered discounts for more than a year. As a result, auto gross margins, which peaked at 30% in Q4 2021 amid industry chip shortages, have plunged well below 20%.
Tesla Stock: Price Increase And Q1 Deliveries
With the first quarter ending in just two weeks, Tesla appears to be heading for a delivery miss. Wall Street consensus currently still has Q1 deliveries of 487,000 units, according to FactSet, but many analysts have cut predictions in recent days. Tesla is expected to report Q1 deliveries in early April.
Observers report that Tesla inventory is currently quite high and that the company's recent price hike announcements do not indicate rising demand. Consumers could also choose to ignore the pricing news and go with cheaper existing inventory Model Y vehicles.
Pricing Just A Marketing Ploy?
Evercore analyst Chris McNally wrote Monday that the recent price increases are likely a marketing push to sell production and inventory into quarter-end as Q1 deliveries appear weak.
McNally added that it "may also be logical to ponder whether constant price changes (primarily communicated over X) is confusing or even negative for brand sentiment."
Deutsche Bank on Monday added that in light of "persistently high" Model Y inventory, the firm believes Tesla's preview of future price increases as an attempt to boost sales this month, rather than a sign of solid demand.
Troy Teslike, a respected source of delivery estimates and Tesla data tracking among retail Tesla investors, wrote on X, formerly Twitter, Tuesday Tesla needs to deliver more than its Q1 2023 total 422,875 in order to "avoid headlines about negative growth."
"The botched Model 3 Highland upgrade at the Fremont factory and flat sales in Europe and China make this a very challenging quarter," Teslike posted.
Tesla Stock Performance
TSLA shares gained 2.5% to 175.66 during market action Wednesday. Tesla is looking for its first weekly advance in three weeks. Last week, Tesla stock dropped 6.7% to 163.57, hitting new 2024 lows and levels not seen since May 2023. TSLA is down about 13% in March.
UBS last week cut its Tesla stock price target to 165, from 225, and maintained a neutral rating on the shares. UBS lowered its Q1 delivery forecast to 432,000 units, from its previous 466,000 view. The firm also cut full-year deliveries to 1.96 million units, from 2.02 million previously.
With 2023 in the rearview mirror, analyst consensus now has 2024 Tesla earnings below 2023's level. That signals another year of earnings declines for this growth stock. Wall Street expects Tesla earnings per share of just $2.96 a share in 2024, according to FactSet. That would be a around a 5% decline vs. last year's $3.12.
Morgan Stanley Tesla bull Adam Jonas recently issued an investor note in which he cut his Tesla 2024 earnings projections by 25%, saying that the EV giant could "potentially" lose money this year.
Jonas slashed his Tesla price target to 320, down from 345, but maintained an overweight rating on the shares. Jonas also whittled down his Tesla 2024 EPS projections to $1.51, his previous view was $2.04 per share. The analyst sees auto gross profit margins sinking to 11.4% amid continued demand issues for EVs.
The EV giant ranks eighth in the 35-member IBD Auto Manufacturers industry group. The stock has a 31 Composite Rating out of a best-possible 99. Tesla stock also has a 9 Relative Strength Rating and a 68 EPS Rating.
Please follow Kit Norton on X, formerly known as Twitter, @KitNorton for more coverage.
YOU MAY ALSO LIKE:
Get Full Access To IBD Stock Lists And Ratings
Learning How To Pick Great Stocks? Read Investor's Corner
