Tesla Inc investor and Future Fund Managing Partner Gary Black has once again criticized the company’s strategy of cutting prices on its electric vehicles. Black expressed disappointment in CEO Elon Musk for failing to switch strategies despite the lack of significant benefits from price cuts.
According to Black, price cuts are not rational if competitors match them and Tesla does not experience a significant increase in sales volume. He believes that Musk’s decision to cut prices to zero margin and make up for it with Full Self-Driving (FSD) subscriptions is misguided.
Black pointed out that although Tesla’s stock rose 102% over the past year, it also experienced a 65% slump in 2022 when the company started offering discounts on its vehicles. This indicates that the jump in stock in 2023 is not proof that price cuts were successful. Additionally, Tesla’s stock saw a 29% decrease over two years compared to the Nasdaq 100 index, which rose 3%.
Tesla began cutting prices in China in late 2022 and extended the strategy to the United States in 2023. While the company has occasionally raised prices, the starting prices on its vehicles remain lower than before the price cuts were implemented.
In 2024, Tesla has already reduced prices on select vehicles in China and Europe. The Model 3 saw a price cut of up to 6% in China and select versions of the Model Y SUV had a price reduction of up to 2.8%. In Germany, the Model Y’s price was cut by as much as 9%.
Black’s criticism highlights the challenges Tesla faces in maintaining profitability while also trying to expand its market share. Price cuts may attract more customers in the short term, but without a significant increase in sales volume, they may not be sustainable in the long run.
The article emphasizes the importance of Tesla’s pricing strategy and its impact on the company’s financial performance and stock value. It suggests that Musk should reconsider his approach and explore alternative strategies to drive growth and profitability.
