Faced with a slumping stock price and questions about demand for its vehicles, Tesla has lowered the U.S. base prices of its two most expensive models.
Morgan Stanley also cited the departure of key executives, recent price cuts on the Model S and the Model X, and CEO Elon Musk's decision last week to pursue a "hard core" cost reduction plan as symptoms of Tesla growing "too big relative to near-term demand".
Tesla said in a statement that it periodically adjusts prices and available options like other vehicle companies.
With the price cuts, the Model S now starts at $71,250 while the X starts at $71,950.
The moves come as Tesla's stock is under pressure, at times dropping below $200 per share this week. Several analysts have questioned whether the company can sell enough cars to cover its expenses without dipping into cash reserves. Shares dropped below eight percent to their lowest close since December 2016 last week after the National Transportation Safety Board (NTSB) said that Tesla's autopilot driver assistance technology was active during a fatal crash. They have fallen more than 38% so far this year, cutting the company's market value more than $20 billion to $36.5 billion. On Monday the shares hit their lowest point since late 2016.
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Bizarrely, the company's attempt to fine-tune the equilibrium price only took place after a modest price hike which was immediately reversed: Reuters reported that according to a Tesla spokesman "Last week, we raised U.S. Model 3 prices by 1%". "By any reasonable standard, these small changes are not newsworthy", the company said in a statement.
Adam Jonas, one of the automotive market's most closely followed analysts has now weighed in with an even more pessimistic viewpoint, "Moving our bear case to $10 from $97 previously". Tesla handed over just 63,000 cars in the first quarter, yet expects to deliver as many as 100,000 cars in the second and four times that for the year.
Tesla lost $700 million in the first quarter, but CEO Elon Musk vows a return to profitability by the third quarter. The electric auto maker reported in April that it delivered 63,000 vehicles in the first quarter, far below expectations of 76,000 deliveries. Sales tumbled 31% in the period.
"Tesla's stock price will have to get back over $300/share for shorts to be deeply in the red again and the threat of a short squeeze to be valid", wrote Ihor Dusaniwsky, S3 Partners' managing director of predictive analytics. Recall, the promise of a $35,000 Model 3 with a full EV credit is how Musk drummed up "420,000" Model 3 reservations more than 3 years ago.