Tesla cuts prices as 4Q deliveries miss analysts' estimates

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According to Tesla, more than three-quarters of its Model 3 orders in the last quarter of the year were from new buyers, not pre-existing reservations.

Shares in Tesla have slumped after the electric auto maker cut USA prices for all its vehicles to offset lower green tax credits and fell short on deliveries of its mass-market Model 3 sedans in the fourth quarter. Up until now, Tesla buyers have qualified for a $7,500 rebate, good until Tesla sold its 200,000th vehicle. It will gradually be phased out this year. Heading into the quarter, financial analytics firm FactSet had projected the company would manufacturer 64,900 Model 3s. The analyst said demand for Tesla vehicles, most notably the Model 3, remained strong leaving 2018 and entering 2019. "I don't expect that Tesla operates in the black in 2019", said Frank Schwope, an analyst with NORD/LB. Production also ramped up during the fourth quarter, enabling the company to complete 86,500 vehicles, up 8 percent from the previous quarter.

The announcements spooked investors and sent shares plunging by as much as 10 per cent in early trading. Volkswagen has developed a mobile juice pack for electric cars. "They don't appeal to everybody", he said, adding that not everyone is interested in the limited range or having to pay extra for a home charging unit.

Q4 deliveries grew to 90,700 vehicles, which was 8% more than our prior all time-high in Q3.

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Tesla recognizes that these incentives are major selling points for their vehicles - that's why the company formed the "EV Drive Coalition" with other prominent EV makers in late 2018. The lot in Chicago has fewer cars on it today, the company said.

The company also fell just short of its promise to deliver 100,000 Model S and Model X vehicles during the year. Analysts questioned whether the $2,000 price cut on all models signaled lower demand in the United States, and ultimately whether the move would undermine nascent profitability at the Silicon Valley automaker, which has never posted an annual profit.

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.

"It was a move that was within the realm of possibility, but it caught investors off guard", he said.