Tesla (NASDAQ:TSLA) slashed its Model Y price in several European nations, including Germany, France, and Norway. The price reduction for its Model Y vehicles in various European countries comes after the electric vehicle (EV) giant made a similar announcement in China.
Tesla lowered the price of its locally produced Model 3 and Y in China to drive volumes amid slowing demand.
EV makers are struggling to drive volumes as macro headwinds and persistently high inflation rates continue to hurt demand. In response, Tesla sacrificed its margins by lowering prices to accelerate volume growth. Due to its continued price cuts, Tesla’s margins have trended lower (see the graph below), which is a concern. Notably, its operating margin plunged 964 basis points year-over-year during the third quarter of 2023.
Is Tesla a Buy or Sell?
Tesla is focusing on maximizing delivery volumes, even if it comes at the cost of margins. Nonetheless, it focuses on reducing the cost per vehicle and generating free cash flow, which is positive. TSLA stock has gained over 67% in one year. However, it faces weakening demand, increased competition, and margin compression, which keeps analysts sidelined.
With 11 Buy, 13 Hold, and five Sell recommendations, Tesla stock has a Hold consensus rating. Analysts’ average price target of $245 implies 13.66% upside potential from current levels.
