Tesla shares fall after carmaker falls short on delivery estimates

Tesla shares fall after carmaker falls short on delivery estimates

Compounding investor anxiety was the company's announcement that it would slash prices on all Tesla models by $2,000, with the price cut meant to offset a reduced federal tax credit that took effect on Tuesday.

The $7,500 credit was halved on Tuesday - the credit gets phased out after an automaker sells more than 200,000 electric vehicles. On Jan. 1 the federal credit for Tesla buyers dropped from $7,500 to $3,750. In the days leading up to New Year's Eve, CEO Elon Musk took to Twitter in an effort to encourage potential customers to pull the trigger before the deadline, but didn't mention the pending price reduction.

The company announced the price cut Wednesday as it released delivery results for the fourth quarter that disappointed investors and sent shares south by more than 9 percent. Actual Model 3 production averaged ~4,700 vehicles per week. The price for this rear-wheel-drive drive model was briefly cut to $45,000 in October, but it was increased by $1,000 just days later. Analysts questioned whether the $2,000 price cut on all models signaled lower demand in the United States, and ultimately whether the move would undermine nascent profitability at the Silicon Valley automaker, which has never posted an annual profit.

Tesla says it delivered over 245,000 electric cars and SUVs last year, almost as many as all previous years combined.

Gary Gastelu is FoxNews.com's Automotive Editor.

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"This was a good quarter in terms of production ramp and strong underlying demand, but Tesla came up shy of bull expectations and this will be the focus of the street", Daniel Ives, an analyst at Wedbush Securities, said in an email.

Starting Wednesday, the company will be reducing its price for Model S, Model X and Model 3 vehicles in the U.S.by $2,000, it said. But customers in those markets still have several weeks to wait, with the company now saying those deliveries will start in February.

Analysts cited by Reuters speculate that Tesla's decision to cut prices is aimed at mitigating the loss of the credit and maintaining the true price tag of the vehicles, including the problematic Model 3. This suggests that many existing reservation holders are still waiting for the cheaper $35,000 vehicle that Tesla has promised but doesn't yet build.

Tesla shares fell as much as 10 percent to $298.80 as of 10:30 a.m. Wednesday in NY. On Jan. 1, the federal credit in the USA for Tesla buyers dropped from $7,500 to $3,750. Tesla said fourth-quarter deliveries were 8 percent higher than its previous quarterly peak in the third quarter of 2018. "I don't expect that Tesla operates in the black in 2019", said Frank Schwope, an analyst with NORD/LB.

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