EV manufacturer Tesla (NASDAQ: TSLA) is down in today’s trading amid some worrying news. A Tesla car owner in California has sued the company in what could turn out to be a class action lawsuit amid allegations that the company frequently violated customer privacy with its cameras.
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A Reuters special report on Friday indicated that between 2019 and 2022, customer recordings, sometimes in compromising situations, were shared internally between Tesla employees. According to the report, employees turned images from customer vehicles into memes, looked inside people’s garages, and shared footage of customer crashes between them.
Over the past five trading sessions, TSLA stock is down by more than 9% as the company has been beleaguered by regulatory concerns, and Tesla’s biggest market outside the U.S., China, has shown signs of slowing car sales.
Data from China Passenger Car Association (CPCA) showed that car sales in the first quarter declined 13.4% year-over-year, while growth in passenger car sales slowed to 0.3% in March versus 10.4% in February. Tesla China posted sales of more than 229,000 EVs in the first quarter, 40% of which were exported to international markets.
Meanwhile, to counter the slowing demand due to the tough macroeconomic environment, TSLA is slashing its prices aggressively both in the U.S. and China. On Friday, the EV automaker slashed prices on all its U.S. models, with Model 3 and Model Y prices lowered by at least $1,000 while Model S and Model X prices dropped by $5,000 or more.
The price wars have raised questions about whether this would lead to sustained pressure on TSLA’s margins. Wells Fargo analyst Colin Langan believes that this could very well turn out to be true. Langan has projected the company’s margin to stand at 17% at the end of Q1, likely to miss consensus estimates of a growth rate of 20%.
The analyst commented, “The price cut drove record Q1 deliveries, but TSLA needs higher deliveries to hit its 2 million target. This implies a risk of more price cuts without at least a major refresh. Competition in China has increased, and some EU models in inventory were reportedly reduced mid-quarter.”
Langan is sidelined about the stock with a Hold rating and a price target of $190, implying an upside potential of 6.2% at current levels.
Analysts are cautiously optimistic about TSLA stock with a Moderate Buy consensus rating based on 19 Buys, 10 Holds, and three Sells.
