Published: Thu, January 03, 2019
Markets | By Jeffery Armstrong

Tesla Had a Record Quarter, so Why Did its Shares Just Nosedive?

Tesla Had a Record Quarter, so Why Did its Shares Just Nosedive?

The move, created to partially offset a reduction in the federal tax credit for its electric vehicles, underscored the key challenge in what is likely to be a pivotal year for the company and its chief executive officer.

Now, Tesla has taken things a step further, opting to slash the price of its Model 3, Model S, and Model X vehicles by $2,000 across the board.

Whereas Tesla began 2018 with production being the big challenge, chief executive officer Elon Musk is starting this year with worries about how much of a market is left for pricier versions of the Model 3. The federal government only offers the tax credit to companies that have sold fewer than 200,000 plug-in vehicles. The Model 3 might be the most affordable option, but its $35,000 still puts it slightly out of reach for the masses.

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Tesla announced a $2,000 reduction in the price of all vehicles to partially offset expiring tax credits, but the move wasn't enough to stop Wall Street from punishing the company today.

The electric-car maker's shares fell by 9.3 percent, to 301.87, in early trading.

Tesla has released its production and delivery figures for the fourth quarter of 2018, capping off what could only be described as a historic year for the electric auto maker. The more than 90,000 deliveries that Tesla was able to accomplish in Q4 translates to about 1,000 vehicles per day - a notable feat for such a young carmaker.

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'The price cut is what's driving the stock lower, as it openly acknowledges the sunset of subsidy dollars is a material headwind, ' Craig Irwin, an analyst with Roth Capital Partners. Tesla's own internal tracking shows its deliveries were in line with or above estimates, spokesman Dave Arnold told reporters.

"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. The company's production grew to 86,555 vehicles, up 8 per cent from the high set in the past quarter.

'The deliveries are below our estimates and the consensus estimates. "I don't expect that Tesla operates in the black in 2019", said Frank Schwope, an analyst with NORD/LB.

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