Tesla falls on price cut, soft deliveries

new york — Tesla shares fell 9 per cent on Wednesday after the electric car maker delivered fewer-than-expected Model 3 sedans in the fourth quarter and cut prices for all its vehicles in the United States to offset a reduction in a green tax credit.

Chief executive Elon Musk is under intense pressure to deliver on his promise of stabilising production for the company’s mass market sedans, seen crucial to it easing a cash crunch and achieving long-term profitability.

The company said it was churning out almost 1,000 of the cars a day, broadly in line with Musk’s promises but slightly short of Wall Street expectations.

The $2,000 cut in prices, however, weighed on the stock, pushing it down 9.4 per cent to $301.69 in morning trade on a broadly weaker day for US markets.

“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.

Under a major tax overhaul passed by the Republican-controlled US Congress late last year, tax credits that lower the cost of electric vehicles are available for the first 200,000 such vehicles sold by an automaker. The tax credit is then reduced by 50 per cent every six months until it phases out.

Tesla has been urging buyers to make use of the federal tax credit, with Musk reminding them on Twitter on Saturday that the benefit would drop to half at the beginning of 2019.

Starting Wednesday, the company will be reducing its price for Model S, Model X and Model 3 vehicles in the US by $2,000, it said.

Tesla delivered 63,150 Model 3s in the quarter, falling short of FactSet estimates of 64,900.