Tesla shares slide after latest Model Y price cut in China
Tesla, which is locked in an escalating price war in its biggest and most important market, unveiled further reductions to its Model Y base price in China.
Updated at 7:42 am EDT
Tesla (TSLA) - Get Free Report shares moved lower in pre-market trading after the carmaker unveiled further price cuts in China amid an ongoing price war in the world's biggest car market.
Tesla lowered the price of its long-range Model Y by 14,000 Chinese yuan, or 4.5%, with a near 4% markdown for its Model Y performance sedan. Tesla also offered insurance subsidies to domestic buyers worth around 8,000 yuan ($1,100.00).
The China Passenger Car Association said last week that domestic vehicle sales fell 2.6% last month, compared to July of last year, with 1.79 million units changing hands. Tesla, the CPCA said, sold 64,285 vehicles, a 31% slump from June and a 16.5% slide from July of last year.
Despite recent tweaks to the upside, prices for the Model Y midsize SUV are down around 24% since the start of the year in the U.S., with the prices for the popular Model 3 sedan down 14%. Earlier this month, in fact, Tesla unveiled a series of rebates for buyers in the U.S., China and Europe as part of its "Refer and Earn" program.
Tesla CEO Elon Musk told investors last month that "it does make sense to sacrifice margins in favor of making more vehicles because we think, in the not too distant future, they will have a dramatic valuation increase," and noted that Tesla will continue to focus on winning market share, as opposed to improving profit margins, over the back half of the year.
Tesla shares were marked 2.27% lower in pre-market trading to indicate an opening bell price of $237.15 each.
Tesla posted better-than-expected second quarter earningslast month, while holding profit margins higher than Wall Street forecasts, even as the carmaker's price cuts continued to pare its overall bottom line.
Adjusted earnings were up 20% from last year to 91 cents per share, while revenues surged 47.2% to a record $24.93 billion.
Adjusted automotive margins were 18.7%, Tesla said, up from the 18.3% figure recorded over the first quarter but down from last year's second quarter tally of 22.4% following a series of price cuts in its biggest global markets. Wall Street forecasts hovered between 17.5% and 17.9%.
Gross margins were 18.2%, down from 25% over the same period last year and 19.3% over the first quarter.
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