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Tesla’s price cuts are working. The company sells more cars.
Sam Yeh/AFP via Getty Images
Investors are seeing the positive impact of Tesla’s price cuts
are
inventory – and now research shows the move has boosted sales and market share.
Tesla
(ticker: TSLA) last cut vehicle prices in China on January 6. So Wedbush analyst Dan Ives conducted a survey of 500 Chinese electric vehicle buyers in mainland China to gauge the impact of the cuts.
“Our research found that 76% of Chinese EV consumers are considering buying a Tesla by 2023, with the closest domestic competitors
BYD
(1211.Hong Kong) in second place followed by
NIO
(
NIO
) in third place,” Ives wrote in a research report.
Tesla’s market share of battery electric vehicle sales in China is between 10% and 15%. The research results point to some market share gains for Tesla after the company cut prices in early 2023.
“[The] research says about Tesla’s recent price cuts…[they’re a] huge success story to date,” added Ives. “Nearly 70% responded that the most recent price cuts have had a positive impact on their decision to be more likely to buy a Tesla Y, proving that the price cuts have been a resounding success.”
There is other evidence that China’s price cuts have had a positive effect.
City
analyst Jeff Chung tracks weekly car insurance registrations in China. Nearly 13,000 Tesla vehicles were registered in the week following the Jan. 6 price cuts, up from registrations the previous week of about 2,100 vehicles.
It’s still a little early to confirm how the price cuts in the US will affect new vehicle orders. Tesla lowered prices in the US on January 12. However, why Tesla lowered prices in the US is obvious. Research firm YipitData found that orders for new Tesla vehicles in America fell sharply at the beginning of the year.
“December 2022 ordering trends benefited from rebates and supercharger incentives that required vehicle delivery to occur before [the] the end of the year,” company spokeswoman Nico Wada said in an emailed statement. YipitData found that orders fell by about 75% in the first week of January compared to the last week of 2022.
In the week after the cuts, the company still had no results. That data should be available soon and could shed light on how the price cuts in the US have affected buyer behavior in this country.
Early signs point to a similar reaction to price cuts in the US that Ives found in China. Edmunds, a provider of information about cars and car purchases, wrote that the Model Y became the most searched vehicle on its website in the week following the cuts. The Y moved up 69 places. The Model 3 came in as the 11th most searched vehicle, up 36 places.
More buyer activity should drive more sales. The Wall Street consensus for Q1 deliveries now stands at about 445,000 vehicles, up from about 438,000 in early January, according to FactSet.
However, the lower prices have resulted in lower profit expectations. Wall Street’s consensus estimate of earnings per share for 2023 is now about $4.80, compared to about $5.50 at the start of the year.
At the start of Friday trading, Tesla shares were up 15% since the announcement of Chinese price cuts. The
Nasdaq composite
was about 5% higher than in the same period.
Tesla shares rose 3.1% on Friday. The
S&P 500
gained 0.8%, and the
Dow Jones Industrial Average
increased by 0.5%.
Ives reviews buying Tesla stock. His stock price target is $175. Overall, about 64% of analysts related to buying Tesla stock. The average Buy rating ratio for stocks in the S&P 500 is about 58%. The average analyst price target is about $214 per share.
Citi’s Chung does not cover Tesla stock. He deals with Chinese car manufacturers.
Write to Al Root at allen.root@dowjones.com