In an unexpected move, EV major Tesla (NASDAQ: TSLA) hiked the prices of its premium Model S and X after a slew of price cuts this year to boost demand. This move comes after TSLA’s declining margins left investors worried about the demand for its EVs. However, according to a Reuters report, the new prices were still 20% lower than at the start of the year.
The company has been on a price-slashing spree in the U.S. and has reduced prices six times in the U.S. since January alone. Tesla’s management had stated on its Q1 earnings call that it was willing to sacrifice its margins in a bid to boost its volumes. The company’s automotive gross profit margins, excluding regulatory credits, dropped to 16% in Q1 from about 21% in the fourth quarter of 2022. This is the first time that TSLA’s margins fell below 20% since the second quarter of 2020.
However, margins remain a persistent concern for Wall Street analysts like Truist analyst William Stein who downgraded the stock to a Hold from a Buy and lowered the price target to $154 from $245. The analyst pointed out that the company going in for price cuts in order to boost volumes and sacrifice margins diminishes the value of its automotive business and amplifies the importance of TSLA’s AI businesses.
Analysts are cautiously optimistic about TSLA stock with a Moderate Buy consensus rating based on 18 Buys, 10 Holds, and four Sells.
