Tesla, Inc. TSLA shares fell on Wednesday, with price cuts across Europe identified as one of the possible downside catalysts. One analyst did not align with the company’s strategy, expressing doubt that the price reductions would drive volume growth.
What Happened: Gary Black from Future Fund stated that European price cuts, considering the anticipated reduction in inventory discounts, are likely to impact Tesla’s 2024 adjusted earnings per share by 15 cents. He highlighted that Tesla reduced Model Y prices in several European countries by 4-9%, with Model Y accounting for approximately 11% of Tesla’s fourth-quarter volume.
Black anticipates that Tesla will likely reduce inventory discounts in Europe by the same amount, at least temporarily. Consequently, he lowered his 2024 adjusted earnings per share estimate for Tesla from $3.90 to $3.75.
See Also: Everything You Need To Know About Tesla Stock
Black criticized Tesla management, stating that cutting configurator prices and inventory discounts by the same amount is “value-destructive.”
“TSLA is training its customers to wait for a deal,” the fund manager said. He also reiterated his view that the company’s management should use “other levers in its marketing toolkit,” such as mass communication to accelerate EV adoption and drive volumes.
Black expects other European automakers to follow suit with similar price cuts, leading to “zero incremental volume growth.”
Why It’s Important: When Tesla announced 2-5% price cuts for its China-made Model 3 EVs last week, Black estimated a 25-30-cent impact, lowering his adjusted earnings per share estimate from $4.20 to $3.90.
In premarket trading on Thursday, Tesla stock rose 0.79% to $217.25, according to Benzinga Pro data.
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