Tesla (NASDAQ:TSLA) has lost over 13.5% in the last month after a strong start to the year (up 52% year-to-date). However, the stock is currently trading at less than half of its all-time high of $414.50. The big question is, should you make the most of the dip, or are there graver underlying concerns that need attention? While the long-term growth story remains intact, the stock may see more downside due to macroeconomic and other temporary headwinds. Therefore, I am neutral on the stock and will wait to buy TSLA at a better price over the coming months.
The stock fell recently following Elon Musk’s lackluster commentary at Tesla’s Investor Day held on March 1, which left investors disappointed. Tesla is also facing investigations over battery and steering wheel issues. The subsequent recalls that followed added to investors’ woes.
EV Price Wars are Getting Worse
Tesla’s global slashing of prices for its vehicles started in January 2023. The price cuts on its top-selling models at the start of the year led to an instant boost in sales. Since then, the EV maker has announced five price cuts. For instance, last week, the company cut the prices of the performance versions of its most premium models — the Model S and Model X — by 4% and 9%, respectively.
There were two key underlying reasons that drove the price cuts. Reason number one was to boost EV demand, and reason two was to gain from tax credits announced in the Inflation Reduction Act. After Tesla’s slashing of prices in early January, Chinese peers like Xpeng Inc. (NASDAQ:XPEV) and NIO (NYSE:NIO) also engaged in price cuts soon thereafter. In addition, international automakers like Ford Motor (NYSE:F) and Toyota Motors (NYSE:TM) also cut the prices of their EV models.
While the initial round of cuts meant higher demand, the continuous rounds of price cuts directly signify that EV demand is suffering due to weak macro sentiment.
Tesla’s Investor Day Wasn’t Impressive
Tesla’s Investor Day held on March 1 was indeed disappointing. Contrary to expectations, Tesla did not give out much detail on the potential launch of its lower-priced new passenger car — a $25,000 variant announced two years ago.
A new, cheaper version could add an incremental revenue opportunity for Tesla. However, neither the production timeline nor other significant details were shared during the event. Rather, the company spoke at length about its new manufacturing business…
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