Tesla shares reverse as Elon Musk slashes prices again in bid to drum up demand
Aggressive price cutting has eaten into profits at Tesla.
The company last night reported a 24 per cent rise in first quarter revenues to £19billion as it made and sold more cars.
But profits fell 26 per cent to £2.2billion fuelling concerns that a series of price cuts instigated by boss Elon Musk is taking its toll.
Shares dropped 4 per cent in New York during after hours trading, adding to its 18 per cent decline in the past six months.
Tesla built a record 440,808 electric cars in the first three months of the year and delivered 422,85 to customers – also a record.
Showman: Elon Musk (pictured), one of the world’s richest men, admitted last year that the cost of the cars was ‘embarrassingly high’
But Musk is cutting prices in a bid to boost sales further – despite the impact on profits. Tesla is set to slash the price of its electric cars in the US for the sixth time this year.
The price of Model Y vehicles is to be cut by £2,400 to around £37,743, and the Model 3 vehicle by £1,600 to £32,100.
After a series of cuts, the models are a respective 29 per cent and 15 per cent cheaper in the US, its largest market, than at the start of the year.
The cuts come less than a week after the Texas firm announced discounts in some European markets, including Germany and France.
In January, it started slashing prices in China to fuel demand. It later branched these out to Europe, Israel and Singapore as well as in Japan, Australia and South Korea, where prices were cut as much as 30 per cent with immediate effect.
Industry insiders suggested the price cuts were likely to be the result of a fall in demand.
The rapid changes have caused some backlash among drivers who say they were ‘duped’ into taking early delivery of cars in December, weeks before the brand started to slash its prices.
Although Tesla’s price war has put pressure on EV start-ups such as Rivian Automotive and Lucid Motors as well as traditional rivals including Ford and General Motors, it has also raised fears about the company’s industry-leading margins.
Musk has pushed back against these claims. ‘We’re not starting a price war. We’re just lowering prices to enable affordability at scale,’ he said.