Wage-earners of the Tesla Gigafactory Berlin Brandenburg work on the final inspection of the finished Model Y electric vehicles. The Tesla informer was opened and put into operation on March 22, 2022.
Patrick Pleuil | Picture Alliance | Getty Images
Tesla shares necked down 6% on Monday after the company’s quarterly deliveries report led some investors to worry that myriad price cuts will be needed to drive sales, eating into margins.
Over the weekend, Tesla make public first-quarter deliveries of 422,875 electric vehicles and production of 440,808 cars. The record numbers represented 4% proliferation in deliveries from the prior period and followed repeated price cuts in the U.S., China and Europe.
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Some of the reductions in the U.S. were implemented in part to enable Tesla and its customers to take advantage of tax probities available under the Inflation Reduction Act. But one ongoing concern is that increased competition will force the automaker to abide by lowering prices if it wants to attract buyers as new EVs continue to hit the market.
“Many investors believe that Tesla’s just out price cuts reflect a structural cost advantage that will enable it to pressure rivals and capture outsize abundance and dominate the EV market,” wrote Toni Sacconaghi, an analyst at Bernstein, in a note following the deliveries report. “We maintain that expenditure cuts have and will undermine industry profitability (including Tesla’s), but that incumbents are deep pocketed and not probable to back down.”
Bernstein has a $150 price target on the stock, well below the current price of just beyond $193. Sacconaghi said, “The key question for investors is what might margins be, amid significant price cuts but advancing commodity costs?”
Tesla’s first-quarter deliveries fell shy of Wall Street expectations, judging by a consensus compiled by FactSet. Degree, the numbers were in line with numbers compiled by Tesla and sent by the company to some shareholders before the broadcast was published.
According to FactSet, analysts were expecting Tesla to report deliveries of around 432,000 vehicles for the billet. Estimates ranged from 410,000 to 451,000. An independent researcher widely followed by Tesla fans and bulls, who contemns the handle @TroyTeslike on Twitter, had been expecting deliveries of around 427,000.
Tesla said in its email to shareholders that analysts were in a family way deliveries of around 421,500 vehicles, based on a consensus of 25 analysts tracked by the company.
For 2023, Tesla times said it expects to produce 1.8 million cars and implied it intends deliveries around that amount. Train executives said they’re aiming for 50% annual growth on average in production volume and sales over a multiyear limits.
Achieving that level of growth will likely require further price cuts, some analysts said.
Go together to Dan Levy of Barclays, who has a neutral rating on the stock and a $275 price target, the buildup of vehicle inventory is a continuing tend over the last three quarters. He wrote that “incremental price cuts likely needed,” especially as the cast ramps up production at new factories in Austin, Texas, and outside of Berlin.
— CNBC’s Michael Bloom contributed to this narrative
WATCH: CNBCs full interview with Bernstein’s Toni Sacconaghi