Tesla slips after Elon Musk announced lower-cost Model 3 (TSLA)




 

Reuters/Jason Lee


Tesla shares slipped Friday morning, down 0.94%, after CEO Elon Musk revealed a lower-cost Model 3 sedan was ready for order on the company's website. They had gained as much as 2.2% in early action.

"Just released lower cost, mid-range Tesla Model 3 & super simple new order page," Musk tweeted Thursday evening. The base price will be $45,000, with vehicles delivered through 2019 eligible for federal and state tax rebates that could drop the cost to as low as $35,000 in California. Musk said the real cost of the sedan would be closer to $31,000 after gas savings.

Until Thursday, the company had been offering only more expensive versions of the sedan. The Model 3 Performance has a base price of $64,000, but that didn't include options like the popular Autopilot driver-assist system.

"For us, the release of a middle ground Model 3 seems a logical next step," a team of Evercore ISI analysts led by Arndt Ellinghorst wrote in a note sent out to clients on Friday. "However, for the stock, we don't believe this new model will change the entrenched positions of most Tesla followers."

Tesla's stock price has plunged more than 30% since its high on August 7, the day Musk tweeted he had "funding secured" to take the electric-car maker private at $420 a share. Musk didn't have funding secured, and he later settled with the Securities and Exchange Commission, which had accused him of misleading the public. As part of the settlement, he agreed to step down as chairman for at least three years and pay a fine of $20 million.

But the damage had been done to Tesla shares, which trade near their lowest level since January 2017. Traders will be watching closely to make sure it stays above the $250 area - a key technical level - over the coming days.

"The big and unanswered question is, will Tesla be able to achieve and maintain its targeted gross margins for Model 3 as mix deteriorates and average RpUs fall?" the Evercore analysts ask.

"Clearly, TSLA believes it can through lower costs and increased scale. Bears, understandably, have doubts. Investors will likely have to wait another 12 months to know conclusively."

Markets Insider

NOW WATCH: Inside the Trump 'MAGA' hat factory

See Also:

COMMENTS

More Related News

Tesla cuts jobs as it looks to make Model 3 more affordable
Tesla cuts jobs as it looks to make Model 3 more affordable

The company, which has struggled to achieve long-term profitability and keep a tight lid on expenses, also said it expects fourth-quarter profit to be lower than the preceding quarter. Chief Executive Officer Elon Musk said the need for lower-priced versions of Model 3 will become even greater from July, when the U.S. tax credit again drops in half, adding $1,875 to the car's price tag, and again at the end of the year when it goes away entirely. The phase-out of the electric vehicle tax break confronts Tesla with the choice of raising prices at the risk of losing customers or slashing costs by thousands of dollars per vehicle, a herculean task for an automaker.

Tesla Is Cutting 3150 Jobs to Increase Model 3 Production
Tesla Is Cutting 3150 Jobs to Increase Model 3 Production

Elon Musk told employees about the cuts in a letter posted online.

Tesla to cut workforce by 7 percent, increase Model 3 production at lower prices
Tesla to cut workforce by 7 percent, increase Model 3 production at lower prices

Saying the road ahead was "very difficult," Tesla's CEO Elon Musk said Friday that the company would be cutting its staff by about 7 percent.

Elon Musk
Elon Musk's 'incredibly expensive' tunneling plans unrealistic, says Uber

Elon Musk's plans for underground tunnels to solve congestion in cities are unrealistic because they are too expensive to dig, Uber has said. Speaking about its "flying car" project, the company's aviation engineering director, Mark Moore, said the Boring Company tunnels pioneered by the entrepreneur were "one of the most expensive things you can do". "It's a great thing if he can do it. The cost is really what he's up against. It really is incredibly expensive to dig holes under the ground," Mr Moore said.  Both Uber and the Boring Company are proposing different ways to tackle cities' significant transport problems, and are both launching projects in Los Angeles, one of America's...

Tesla to cut workforce by 7 percent, sees smaller fourth-quarter profit
Tesla to cut workforce by 7 percent, sees smaller fourth-quarter profit

The company has long struggled with cash burn and Chief Executive Officer Elon Musk has been under intense pressure to stabilize production of the Model 3, seen critical for easing a cash crunch and achieving long-term profitability. "I want to make sure that you know all the facts and figures and understand that the road ahead is very difficult," Musk said in an email to employees that was published on the company's blog. This is Tesla's second job cut in seven months and comes just days after it cut U.S. prices for all vehicles and fell short on quarterly deliveries of its mass-market Model 3 sedan.

Leave a Comment

Your email address will not be published. Required fields are marked with *

Cancel reply

Comments

Top News: Economy

facebook
Hit "Like"
Don't miss any important news
Thanks, you don't need to show me this anymore.