Tesla has already slashed prices six times this year and chief Elon Musk suggested more such moves ahead.
Tesla’s shares sank nearly 10 percent on Thursday after Chief Executive Elon Musk signaled the electric vehicle maker will keep cutting prices to drive up demand even after taking a big hit to margins.
The stock was trading at $163, dragging down other automakers. At least 15 analysts lowered their price targets on Tesla, whose market value was on track to drop by $50bn to about $517bn, if losses hold. That would put Tesla’s value below that of Meta Platforms Inc for the first time since 2021.
“Facing a volatile macroeconomic backdrop and weakening demand, Tesla continues to prioritize units over near-term profits,” said analysts at Canaccord Genuity.
Tesla’s gross profit margins fell in the first quarter to the lowest in more than two years, missing market estimates, after the company kicked off a global price war in January to defend its dominance in the US and make inroads in China, its second-largest market.
Tesla’s automotive gross margin, excluding regulatory credits and leasing, stood at 18.3 percent, missing the above 20 percent target provided in January by Tesla CFO Zachary Kirkhorn. A higher gross margin means a company retains more capital, which it can then use to pay for other costs or service its debt.
Tesla has already slashed prices six times this year and Musk suggested more such moves ahead, saying the company will put sales growth ahead of profit in a weak economy.
“We’ve taken a view that pushing for higher volumes and a larger fleet is the right choice here versus a lower volume and a higher margin,” he said.
Investors dumped automakers from Europe to the United States on fears that margins will be sacrificed for maintaining share in a market that is slowing.
“Long-term we believe this (Tesla’s price cuts) is the right strategy and leverages their cost leadership position. However, this does not come without pain as we now believe margins will get worse before they get better,” RBC analyst Tom Narayan said.
US automakers ranging from Ford Motor Co to startups such as Lucid Group Inc fell between 3.3 percent and 4.4 percent.
France-based Renault, whose finance chief said the company will not drastically cut prices on its EVs amid Tesla’s downward “spiral”, was down 7.6 percent, while Germany’s Volkswagen fell 3.5 percent.