Tesla (TSLA) -) shares moved lower in early Friday trading after the carmaker unveiled another round of price cuts following a weaker-than-expected tally for third quarter deliveries.
Tesla, which has lowered prices for its flagship cars in key markets around the world multiple times this year, will cut the cost of its Model Y SUV, as well as its Model 3 sedan by as much as 4.2% for U.S. customers.
The move comes amid a concerted, and publicly-stated effort from founder and CEO Elon Musk to sacrifice profitability over gaining market share in the highly-competitive EV market.
To that end, Tesla has slashed the cost of its flagship Model 3 by around 17% since the start of the year, with a steeper 26% reduction in costs for the Model Y.
The cuts have taken their toll on Tesla's profit margins, however, which were pegged at 18.7% for the three months ending in June, down from the year-earlier tally of 22.4%.
Demand has also been questioned, particularly in China, Tesla's biggest market, following weaker-than-expected third quarter deliveries of 435,059 new cars over the three months ended in June. Analysts' forecasts for deliveries ranged from 420,000 to around 470,000 with Refinitiv pegging the March quarter target at 459,000.
"A sequential decline in volumes was caused by planned downtimes for factory upgrades, as discussed on the most recent earnings call. Our 2023 volume target of around 1.8 million vehicles remains unchanged," Tesla said in a statement.
Tesla will publish its formal third quarter earnings on October 18.
Tesla shares were marked 3% lower in early Friday trading to change hands at $252.33 each a move that would still leave the stock up more than 36% over the past six months.
Last month, Goldman Sachs analyst Mark Delaney argued that price cuts are likely to pressure gross margins and lead to lower overall profits this year and next.
"We lower our 2023 and 2024 EPS estimates for Tesla, mostly on lower ASPs and in turn auto gross margin ex credit assumptions (driven by lower prices for S/X and to a lesser extent Model Y, and partly offset by higher Model 3 ASP assumptions)," Delaney wrote.
"Tesla materially reduced S/X pricing on 9/1 by 15-19%, and reduced Model Y pricing in China in mid-August (and has been discounting inventory on hand in other markets like the US this quarter)," Delaney added.
held to his 'neutral' rating on Tesla, as well as his $275 price target, but s
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