Tesla reduces vehicle prices, shares tumble

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The price reduction of Tesla vehicles sent shares of the electric vehicle maker down nearly 7% on worries of future profitability.
The price reduction of Tesla vehicles sent shares of the electric vehicle maker down nearly 7% on worries of future profitability.

Tesla has reduced prices of all its vehicles resulting in a fall of its share price.

The company has released results of its Q4 2018 vehicle production and deliveries, while also announcing $2 000 price reduction in the US.

This as the company last week named two independent board directors as part of a September deal with federal regulators to move past the turbulence following chief executive officer Elon Musk's tweet about taking the electric carmaker private.

The company said Oracle founder Larry Ellison and Walgreens Boots Alliance's global head of human resources Kathleen Wilson-Thompson joined the board as independent directors, effective 27 December. Ellison bought 3 million shares of Tesla earlier this year.

In a statement, Tesla said in Q4, it produced and delivered at the rate of nearly 1 000 vehicles per day, setting new company records for both production and deliveries.

It added that production in Q4 grew to 86 555 vehicles, 8% more than its prior all-time high in Q3. This included: 61 394 Model 3 vehicles, in line with the company's guidance and 15% more than Q3. It noted that it produced 25 161 Model S and X vehicles, consistent with its long-term run rate of approximately 100 000 per year.

According to Tesla, Q4 deliveries grew to 90 700 vehicles, which was 8% more than its prior all time-high in Q3. This included 63 150 Model 3 (13% growth over Q3), 13 500 Model S, and 14 050 Model X vehicles.

"In 2018, we delivered a total of 245 240 vehicles: 145 846 Model 3 and 99 394 Model S and X. To put our growth into perspective, we delivered almost as many vehicles in 2018 as we did in all prior years combined.

"Our Q4 Model 3 deliveries were limited to mid- and higher-priced variants, cash/loan transactions, and North American customers only. More than three quarters of Model 3 orders in Q4 came from new customers, rather than reservation holders," the company says.

However, it points out that there remains significant opportunities to continue to grow Model 3 sales by expanding to international markets, introducing lower-priced variants and offering leasing.

International deliveries in Europe and China will start in February 2019. Expansion of Model 3 sales to other markets, including with a right-hand drive variant, will occur later in 2019, it notes.

1 010 Model 3 vehicles and 1 897 Model S and X vehicles were in transit to customers at the end of Q4, and will be delivered in early Q1 2019, says Tesla.

"Our inventory levels remain the smallest in the automotive industry, and we were able to reduce vehicles in transit to customers by significantly improving our logistics system in North America.

"Moving beyond the success of Q4, we are taking steps to partially absorb the reduction of the federal EV tax credit (which, as of 1 January, dropped from $7 500 to $3 750). Starting today, we are reducing the price of Model S, Model X and Model 3 vehicles in the US by $2 000."

Tesla notes that customers can apply to receive the $3 750 federal tax credit for new deliveries starting on 1 January, 2019, and may also be eligible for several state and local electric vehicle and utility incentives, which range up to $4 000.

"Combined with the reduced costs of maintenance and of charging a Tesla versus paying for gas at the pump - which can result in up to $100 per month or more in savings - this means our vehicles are even more affordable than similarly priced gasoline vehicles," it says.

Meawhile, Reuters reports that the price reduction of the vehicles sent shares of the electric vehicle maker down nearly 7% on worries of future profitability.

According to Reuters, analysts questioned whether the $2 000 price cut on all models signalled lower demand in the US, and ultimately whether the move would undermine nascent profitability at the Silicon Valley automaker, which has never posted an annual profit.

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