Tesla Reduces Price on Model S, Model X

Marco Green
May 22, 2019

Tesla is lowering the price of its two most expensive models by $2,000 to $3,000, not including tax credits.

Morgan Stanley slashed its "bear case", or worst case, forecast for Tesla shares from $97 to $10 amid growing concern about disappointing demand for the group's Model 3 vehicle and its debt.

As with previous price adjustments, Tesla said in a statement that like other vehicle companies it periodically adjusts prices and available options. The statement didn't say if slowing sales influenced the decision. The stock had already closed at the lowest level in nearly 2 1/2 years on Friday, after Chief Executive Officer Elon Musk called for a " hardcore" review of all the company's expenses and another analyst warned of potentially severe fallout from a fatal crash involving Autopilot.

The analysts' best case price outlook, or the "bull case", is $391.

On Monday Wedbush analyst Daniel Ives wrote in a client note that he has concerns about Tesla's growth prospects and underlying demand for the Model 3 during the coming quarters. The company posted a $702 million loss for the quarter. All of this came after Tesla had difficulties producing the Model 3. He's run afoul of the Securities and Exchange Commission for posting important company information on Twitter. He berated stock market analysts for asking questions about Tesla's finances and was sued after calling a diver who helped rescue a Thai youth soccer team from a flooded cave a pedophile.

Tesla's stock, which has nearly halved in value since last August, closed at $205.36 on Monday.

The fundraising "may provide an extra year of liquidity to run a business of this size and cash consumption", the analysts wrote, but it's far from enough to offset the negative impact from Tesla's steep market value decline on employee morale and consumer confidence.

With the price cuts, the Model S now starts at $71,250 while the X starts at $71,950.

The Model S sedan was reduced by $3,000, while the Model X SUV received a $2,000 cut. "By any reasonable standard, these small changes are not newsworthy", the company said in a statement.

If Tesla is unable to earn profit in the second half of the year, the company may need to raise another $1 billion to $2 billion of capital, Ives said in an interview with Bloomberg Television. Sales tumbled 31% in the period.

Tesla lost $700 million in the first quarter, but CEO Elon Musk vows a return to profitability by the third quarter.

Other reports by Click Lancashire

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