Tesla shares fall as it cuts car prices and misses production estimates

Shares in Tesla have fallen more than 10 per cent as markets opened this afternoon, after the electric vehicle manufacturer said it would be cutting the prices of its cars by $2,000 (£1,586).

The carmaker was forced to partially absorb the cost of changes to a US green tax credit for electric vehicles, which almost halved yesterday to $3,750. As a result, all three of its models will now be priced $2,000 lower, according to a regulatory filing.

The tax credit had previously been used by buyers as a means of paying less for a Tesla car. Chief executive Elon Musk utilised this by repeatedly reminding his Twitter followers that the scheme would end in its current form on 1 January.

Releasing its production numbers for the fourth quarter, Tesla said it produced a total of 86,555 vehicles, including 61,394 vehicles of its Model 3 sedan which was plagued by production woes earlier this year.

This was up from a total of 53,239 Model 3s in the third quarter, but no improvement was made on its target rate of 5,000 cars per week. The figures came despite Tesla's statement in October that it would focus on increasing its production rate in the fourth quarter.

The company also appeared to miss analyst estimates on deliveries of the Model 3, hitting 63,150 delivered vehicles compared to Wall Street forecasts of 64,900 as polled by Factset.

Overall deliveries in the fourth quarter reached 90,700 vehicles, more than 8 per cent higher than its previous all-time record-high. This amounted to a total of 245,240 vehicles for 2018, which Tesla said was almost as many vehicles delivered as it had achieved in all prior years combined.

"For most automotive groups these would be very impressive numbers – almost tripling the number of vehicles you deliver in just one year is no mean feat, and Musk and his team deserve a huge amount of credit," said Nicholas Hyett, an equity analyst at Hargreaves Lansdown. 

"But unfortunately for Tesla shareholders, the market has come to expect Herculean achievements, and sometimes that means the bar is just that little bit too high. Deliveries have fallen short of what some analysts had expected and the shares are suffering as a result."

Hyett added that at its current rate of deliveries, Tesla could lose $700m in revenue this year from the price cuts.

"Not all those sales are in the US of course, but it’s far from ideal for a company which has only just made it into cash positive territory," he concluded.

Tesla's financial results for the fourth quarter are expected to be announced next month, with consensus estimates as polled by S&P Global Intelligence forecasting earnings before tax of $426.7bn.