Delivery volume declines, Tesla lowers prices at midnight, adjusts Model 3 and Model Y prices in the US.

Tesla announced on the evening of October 5th local time that it would lower the starting prices of some models of the Model 3 and Model Y in the United States. Tesla had previously released data showing that its delivery volume in the third quarter was lower than analysts' expectations, with a MoM decline.

According to the Tesla website, the starting price of the Standard Range Model 3 has been lowered from $40,240 to $38,990, the starting price of the Long Range version has been reduced from $47,240 to $45,990, and the starting price of the Performance version has been lowered from $53,240 to $51,990.

At the same time, the starting price of the Performance version of the Model Y has been reduced from $54,490 to $52,490, and the starting price of the Long Range version has been lowered from $50,490 to $48,490.

After the announcement, Tesla's stock price opened lower on October 6th local time, and as of the time of writing, the stock price was $254.59, down 2.1%.

Since the end of last year, Tesla has been lowering prices globally in order to stimulate demand, mainly due to weak consumer spending in major markets and increased competition in the electric vehicle industry.

In China and the United States, the company's two largest markets, Tesla regularly adjusts the prices of its models. However, a few days ago, the company stated that it only delivered 435,059 vehicles in the third quarter, lower than analysts' expectations of 456,722 vehicles, and also a decline from the previous quarter.

This is also the first MoM decline in delivery volume for Tesla since the second quarter of 2022. The last MoM decline in delivery volume can be traced back to early 2020. Tesla stated that the decline in delivery volume was mainly due to the closure and upgrade of some factories, which was discussed at the last earnings report meeting.

At that time, Tesla CEO Elon Musk said that the company would continue to pursue its goal of delivering 1.8 million vehicles for the year. However, he also warned that the decline in production was mainly due to the summer closure and upgrade of multiple factories.

Musk had previously stated that Tesla chose a high-volume, low-price strategy this year. The company's stock price has doubled so far this year and it can afford to pay dividends. Tesla still hopes to achieve its goal of delivering 1.8 million vehicles this year. So far, Tesla's price reduction strategy has been successful.

However, analysts are not convinced and refer to this price reduction as a midnight price cut. They believe that the lower-than-expected delivery volume in the third quarter is not due to factory closures, but mainly due to weak demand.

Analysts point out that Tesla chose to lower prices just five days into the fourth quarter, and the company's delivery volume in the third quarter was only 4,500 vehicles more than its production volume for the quarter. As the company's inventory reached a record high of 106,000 vehicles entering the fourth quarter, it is clear that Tesla's main problem is weak demand. And if Tesla wants to achieve its goal of selling 1.8 million vehicles this year, it means that the net profit margin for selling these vehicles will turn negative.

In mid-September, Goldman Sachs had predicted that Tesla would lower prices and questioned whether continuous price reductions would lower the company's profits, leading to a downward revision of its profit forecast for Tesla. Analysts at that time believed that Tesla would lower its prices in 2024 to support its high production strategy. They believed that the cost reduction achieved through increased volume would not be enough to offset the loss in earnings per share caused by the price reduction. Therefore, analysts at that time lowered their earnings per share expectations for Tesla in 2023 and 2024.