Tesla Aggressively Cuts Prices Ahead Of Q1 Report: EV Maker Lowers Model 3, Y Prices In China By Up To 6%, Cuts US FSD Price By $4K
Portfolio Pulse from Shanthi Rexaline
Tesla, Inc. (NASDAQ:TSLA) has reduced prices for its electric vehicles in China by 4% to 6% and cut the U.S. price of its full self-driving (FSD) software by $4,000. The price cuts in China affect all trim levels of the Model 3 and Y, as well as the high-end Model S and X EVs. In the U.S., the FSD software price was reduced from $12,000 to $8,000. These price reductions are part of Tesla's strategy to focus on high-margin recurring revenue streams, despite potential hits to EV business profits. The company expects these cuts to cost $900 million annually, impacting earnings by 20 cents per share. If implemented globally, the cost could rise to $2.7 billion or 60 cents per share in earnings. Tesla's stock closed down 1.92% at $147.05, the lowest since late-January 2023.
April 21, 2024 | 12:34 pm
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Tesla's aggressive price cuts in China and the U.S. for its EVs and FSD software are part of a strategy to boost high-margin recurring revenue, despite potential short-term profit impacts. These moves could cost Tesla $900 million annually, affecting earnings by 20 cents per share, with a global implementation possibly costing $2.7 billion or 60 cents per share in earnings. The stock closed down 1.92% at $147.05, its lowest since late-January 2023.
The price reductions are a strategic move by Tesla to increase the adoption of its vehicles and FSD software, aiming for long-term gains through recurring revenue. However, the immediate financial impact of these cuts, as estimated by analysts, suggests a significant cost to Tesla, potentially affecting its profitability and earnings per share. This, combined with the stock's recent performance, indicates a negative short-term impact on TSLA's stock price.
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