Tesla Stock: Vehicle prices are rising everywhere. Will consumers call Tesla's bluff?

Tesla (TSLA) looks set to raise Model Y prices in all of its key sales regions next month, in what many analysts see as a gamble to boost additional first-quarter sales as the electric car giant heads toward a potential delivery failure. However, it remains to be seen whether customers will snap up Tesla cars in March or call the company a bluff. TSLA shares rose early Wednesday.

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Tesla will reportedly raise Model Y prices in China on April 1, according to local media reports on Wednesday. The move comes after the electric car giant had already announced plans to increase Model Y prices in Europe and the US, starting March 22 and April 1, respectively.

Tesla is expected to raise the price of the Model Y by $700 in China on April 1. However, with current insurance support and other deals ending this month, the actual price increase will be around $3,200, according to Chinese media reports. China's economy, which has been faltering for years, is showing signs that it may strengthen with potential demand growth in 2024.

Meanwhile, the global electric vehicle giant is also currently offering inventory discounts ranging from $1,000 to $1,500 for Model Ys in China.

Tesla said over the weekend that it will increase the price of all Model Y models in the United States by $1,000 next month, while Model Y prices in Europe will rise by about $2,100 on Friday.

The pricing move comes after Tesla, to maintain sales momentum, aggressively reduced car prices and offered discounts for more than a year. As a result, automotive gross profit margins, which peaked at 30% in the fourth quarter of 2021 amid the industrial chip shortage, have fallen to well below 20%.

Tesla stock: Price increase and first quarter deliveries

With the first quarter ending in just two weeks, Tesla appears to be headed toward a delivery failure. The Wall Street consensus still currently includes first-quarter deliveries of 487,000 units, according to FactSet, but several analysts have lowered expectations in recent days. Tesla is expected to announce first-quarter deliveries in early April.

Observers report that Tesla's inventory is currently very high and that the company's recent price hike announcements do not indicate high demand. Consumers can also choose to ignore the pricing news and go with existing Model Y vehicles with cheaper stock.

Is pricing just a marketing ploy?

Evercore analyst Chris McNally wrote on Monday that the recent price increases will likely serve as a marketing push to sell off production and inventory through the end of the quarter as first-quarter deliveries look weak.

McNally added that “it may also make sense to consider whether constant price changes (essentially communicated via X) are confusing or even negative for brand sentiment.”

Deutsche Bank added on Monday that in light of “consistently high” Model Y inventory, the company believes Tesla's preview of future price increases is an attempt to boost sales this month, rather than a sign of strong demand.

Tesla needs to deliver more than the first-quarter 2023 total of 422,875 in order to “avoid headlines about negative growth,” Troy Teslick, a respected source for delivery estimates and Tesla data tracker among retail Tesla investors, wrote on X, formerly Twitter, on Tuesday. “.

“The failed Model 3 Highland upgrade at the Fremont plant and flat sales in Europe and China make this a very difficult quarter,” Teslik posted.

Tesla stock performance

TSLA shares rose 0.8% to 172.58 during Wednesday's market action. Tesla stock ended Tuesday up 4.7% on the week, looking for its first weekly advance in three weeks. Last week, Tesla stock fell 6.7% to 163.57, hitting new lows for 2024 and levels not seen since May 2023. TSLA stock fell more than 15% in March.

UBS last week cut Tesla's stock price target to 165, from 225, and maintained a neutral rating on the stock. UBS cut its first-quarter delivery forecast to 432,000 units, from its previous forecast of 466,000. The company also cut full-year deliveries to 1.96 million units, from 2.02 million previously.

With 2023 in the rearview mirror, the analyst consensus now points to Tesla's 2024 earnings being below the 2023 level. That signals another year of declining earnings for this growth stock. Wall Street expects Tesla to have earnings of just $2.96 per share in 2024, according to FactSet. That would be a decline of about 5% versus $3.12 a year ago.

Morgan Stanley Tesla bull Adam Jonas recently issued an investment note in which he cut Tesla's 2024 earnings forecast by 25%, saying the electric car giant could “likely” lose money this year.

Jonas cut his Tesla stock price target to 320, down from 345, but maintained an overweight rating on the stock. Jonas also cut his Tesla 2024 EPS forecast to $1.51, his previous view was $2.04 per share. The analyst believes that gross profit margins for cars will decline to 11.4% amid continued demand problems for electric vehicles.

The electric vehicle giant ranks eighth in the 35-member IBD Automotive Manufacturers Industry Group. The stock has a Composite Rating of 31 out of a top 99. Tesla stock also has a 9 Relative Strength Rating and a 68 EPS Rating.

sRent to follow Kit Norton on X, formerly known as Twitter, @ketnorton For more coverage.

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