Video Discription |
And here again! Elon has surprised the industry with another stroke! We cannot call it a masterstroke as Musk can face a great number of losses and Tesla can lose against other competitors like Toyota or Ford in the EV Market. Is it some kind of technique of musk to bluff with the others? Will this be THE MOVE for tesla? Here at TECH ADDICTS, let's get all the updates regarding this.
Tesla's significant price cuts in the United States and Europe, which followed on the heels of two rounds of reductions in China over the course of ten weeks, can be interpreted in a number of different ways.
For those who look at the world through a pessimistic lens, it is obvious that the automobile manufacturer was having trouble generating orders. Although the disparity is not catastrophic, it is part of a trend that is not typical for Tesla, which is that the firm produced over 34,000 more vehicles than it delivered in the fourth quarter. After all, CEO Elon Musk told investors back in October that the business anticipated selling every car it could produce "for as long into the future as we can see."
Toni Sacconaghi, a Bernstein analyst who has the equivalent of a sell recommendation on the stock, wrote to clients on Tuesday that "Tesla's recent price drops were a response to a demand problem." He said this in reference to the company's previous pricing reductions. "Although we (and many other investors) had anticipated price reductions, such reductions were deeper than we had anticipated and happened far sooner than we had anticipated."
The optimists believe that Elon Musk has just started a pricing war that Tesla has a good chance of winning, even if it is highly unlikely that Tesla will emerge from this conflict undamaged.
There is no question that cutting the price of the Model Y by twenty percent and cutting the price of performance variants of the Model S and Model X by around twenty thousand dollars would put pressure on profitability. But Tesla is earning significantly more than another electric vehicle (EV) firms, and with the exception of BYD in China, no other carmaker comes anywhere close to producing as many electric cars as Tesla does.
According to John Murphy, an analyst at Bank of America who has the equivalent of a hold recommendation on the electric vehicle manufacturer's shares, "Tesla has greater margins than other OEMs including GM and Ford, and cushion to cut prices even further." Murphy made this statement on Tuesday. "The majority of original equipment manufacturers (OEMs) are now making a loss on electric vehicles, and these price cuts are expected to make the business even more difficult at a time when they are striving to ramp up production of electric vehicle products. Should the pricing of electric vehicles prove to be less advantageous, original equipment manufacturers will need to reevaluate their investments and determine whether or not they provide acceptable returns.
During the height of the Great Recession, which began approximately 15 years ago, Tesla came dangerously close to declaring bankruptcy. After that, the company expanded in part because of an extended era of cheap interest rates, simple access to cash, and a lack of rivalry in the market.
That has completely shifted. As a result of rate hikes by the Federal Reserve, the cost of borrowing money has increased, and Tesla is no longer the only option available. BYD is making significant headway in China, Volkswagen is exerting significant effort to defend its position in Europe, and Ford and General Motors are doing the same thing in the United States.
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