Tesla shares stumble on price cut, disappointing Model 3 deliveries


When Elon Musk first announced the mainstream Model 3 electric vehicle from Tesla in mid-2016, he proclaimed that the vehicle would have a base price of $35,000.

Tesla shares fell 7.2 percent in midday trading to $308.94.

The news also comes as automakers and analysts expect USA new vehicle sales to weaken in 2019.

Ross Gerber, the president and CEO of Gerber Kawasaki, said Tesla's latest figures prove that its production line is consistent with high quality, but that the stock is down because of the price cut, which was unexpected.

Tesla Inc. (TSLA.O) shares dropped as much as 10 per cent on Wednesday after the company reported fourth-quarter Model 3 deliveries just below estimates and said it would lower the price of its cars, prompting at least one analyst to flag the selloff as "overdone".

Tesla shares fell 9 percent on Wednesday after the electric auto maker delivered fewer-than-expected Model 3 sedans in the fourth quarter and cut prices for all its vehicles in the United States to offset a reduction in a green tax credit.

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Ahead of the price cut announcement, chief executive Elon Musk urged Tesla customers to make use of federal tax credits.

Hargreaves Lansdown analyst Nicholas Hyett reportedly estimated in a client note that if Tesla continues to deliver cars at its current rate, the price cut will mean $700 million in lost revenue in 2019. GM declined to comment. Wedbush Securities analyst Dan Ives told CNBC that Tesla's failure to meet Wall Street projection was something that his firm had been prepared for: "It was a move that was within the realm of possibility, but it caught investors off guard", he said.

Bank of America reportedly expected the company to deliver 71,500 Model 3s.

Tax credits on its vehicles contributed to that profit. Tesla said fourth-quarter deliveries were 8 percent higher than its previous quarterly peak in the third quarter of 2018.

Production in Q4 grew to 86,555 vehicles, 8% more than our prior all-time high in Q3. The company churned out 61,394 Model 3s, up from a total of 53,239 Model 3s in the third quarter.

At least some of the volatility in Tesla pricing is likely due to overall market jitters and questions about whether a recession could be looming following the market's worst overall performance since 2008. The deliveries are below our estimates and the consensus estimates. "I don't expect that Tesla operates in the black in 2019", Frank Schwope, an analyst with NORD/LB said.