After peaking at almost $220, Tesla (TSLA) shares pulled back from resistance at the 200-day simple moving average on the stock chart. Whereas the company spurred demand when it cut prices in Jan. 2023, the latest price cut may hurt investors. Tesla adjusted the Model Y and Model 3 four times in 2023.
On Mar. 6, 2023, Tesla cut prices of its Model S and Model X. Demand for the most expensive models could boost demand. The EV leader has the luxury to charge less. It has gigafactories worldwide. Inventory is climbing. Furthermore, the more demand it attracts, the more it hurts the competition.
Tesla is strengthening its moat and growing its market share as startup EV firms struggle. New firms do not have economies of scale as Tesla does. It also recognizes the weakness in the automotive market when other carmakers have a lot full of unsold units.
The flood of supply will hurt profit margins for all companies. Tesla needs to get ahead of the glut by lowering its inventory. By growing its customer count, the company will leverage its superior software technology.
Risks
Fighting competition with price cuts has risks. As long as customers do not view it as just another car company, Tesla will thrive.