Tesla could continue cutting prices, analysts advise
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Tesla (NASDAQ:TSLA) is likely not done trimming prices for its autos in 2023, leading to further margin contraction, according to multiple analyses published on Monday.
On Friday, the automaker cut prices on all US models, with Model 3 and Model Y sticker prices sliding by at least $1,000 while Model S and Model X prices fell by $5,000 or more. Bernstein analyst Toni Sacconaghi indicated that the price cuts were not surprising given elevated inventory levels, âbut the timing and details (early in the quarter; in the US price; including the Model Y)â caught him off guard. 
âWe believe additional price cuts in other geographies are likely,â he told clients. âThe fact that Tesla is cutting price on its longest lead time model suggests other price cuts are likely to follow, particularly since Model 3 SR rebates will fall $3750 on 4/18, and competition continues to intensify. Make no mistake - the price cuts reflect Tesla's need to stimulate demand and are an explicit trade off of margins for volume.â
As such, he does not see a bottom for margins in the near term and will âundermine industry profitabilityâ as other automakers are forced to match Teslaâs actions. Assessing the overall auto industry, Sacconaghi said that âincumbents are deep pocketed and not likely to back downâ in the face of Teslaâs price cuts. 
âSome investors maintain that Tesla's recent price cuts reflect a structural cost advantage that will enable it to pressure rivals and capture outsize volume and dominate the EV market,â he acknowledged. âUltimately, we believe that the automotive market is hyper-competitive, and very difficult for any OEM to sustain an ongoing competitive cost advantage.â
Sacconaghi assigned the stock an Underperform rating and a $150 price target on Tesla (TSLA).
Wells Fargo analyst Colin Langan meanwhile maintained a Hold-equivalent rating as margins are expected to remain under pressure. He forecast Q1 margins of 17%, missing the consensus expectation of over 20% growth. 
âThe price cut drove record Q1 deliveries, but TSLA needs higher deliveries to hit its 2M target,â Langan wrote. âThis implies a risk of more price cuts, without at least a major refresh. Competition in China has increased, and some EU models in inventory were reportedly reduced mid-quarter.â
Shares of Tesla (TSLA) slipped 3.5% during Monday's trading.
Read more on Citiâs perception of the price cuts.