news 
Despite Tesla’s Wild Stock Surge, Musk Turns to Discounts to Juice Sliding Sales
Tesla Inc.’s (TSLA) remarkable stock surge may have defied expectations, but the electric vehicle pioneer’s sales momentum is less convincing. As a result, CEO Elon Musk has resorted to discounts and incentives to reinvigorate flagging demand.
In an effort to stimulate sluggish sales, Tesla is offering discounted prices on new vehicles, including cheaper lease options and cash discounts for select models, according to reports. This move comes as the company’s market share in the US electric vehicle (EV) segment shrinks alarmingly, down from a peak of 80% in 2020 to less than 50% this year.
Industry observers warn that Tesla should be cautious about sacrificing profit margins and potentially eroding resale values by engaging in discounting practices. However, analyst Ben Kallo at Baird believes the strategy may help prop up sales in the near term: “I think they need to do it,” he said in a research note. “It’s not ideal, but I get why they’re doing it.”
Kallo also emphasized that investors should be cautious about Tesla’s growth prospects going forward due to concerns over the company’s dependence on discounts and the potential for a decline in profitability. “We believe that investors should be more cautious with their expectations around Tesla’s future growth,” he cautioned.
Meanwhile, Deutsche Bank analyst Michael Yu pointed out that Tesla is already offering discounts in China, its top market by revenue. The bank notes that these deals have been successful in boosting sales, but warns that the practice may become unsustainable if continued for an extended period.
Tesla’s challenges are compounded by a looming threat to Biden’s EV tax credit, which could potentially eliminate the incentive for buyers of electric vehicles starting mid-2025 or later. Even without this change, some analysts predict that Tesla will struggle to grow its market share in the face of increased competition from established automakers and newer entrants like Rivian.
Despite these challenges, Cox Automotive forecasts a record-breaking year for EV sales in 2024, with 1.3 million vehicles expected to be sold, up 7% from last year’s total. The company also predicts that Tesla will still dominate the market, but its share is likely to shrink further due to growing competition.
In summary, while Tesla’s stock price may have skyrocketed recently, the underlying sales dynamics paint a more concerning picture for investors and analysts alike.
Source: www.forbes.com
