Tesla stock sinks after $2,000 price cut

No sooner did Elon Musk put a raucous 2018 behind him than a new worry erupted for Tesla Inc.: a potential ceiling in demand for its cars.

Tesla’s shares plunged on the first day of 2019 trading after the company unexpectedly announced it was cutting prices by US$2,000. The move, designed 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.

The carmaker also said Wednesday that fourth-quarter deliveries fell just short of analysts’ estimates.

The 63,150 Model 3s handed over to customers in the fourth quarter trailed the roughly 63,700 average analyst projection.

Tesla said more than threequarters of orders for the sedan in the year’s final three months were from new customers, rather than reservation holders.

That suggests many consumers are still waiting to buy versions of the vehicle at the long-promised $35,000 sticker price.

“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. “We also believe the $2,000 price cut to help subsidize the lower EV tax credit is a move that was not fully expected.”

Tesla shares fell as much as 10 per cent to $298.80 Wednesday. The stock advanced 6.9 per cent last year while most other auto manufacturers dropped.

The electric-car maker’s 5.3 per cent junk bonds due in 2025 were the biggest decliners in the market Wednesday morning, slipping 2 cents on the dollar to 85.5 cents, the largest drop since September,