First thoughts on the price cuts overnight. People see this as bearish and I can understand. The largest question is what is the margin profile right now on the models. If they managed to gain operating leverage through gaining scale and removing inefficiencies then it’s absolutely awesome that they are cutting prices, especially IF they can retain the margins. This could also be a product of decelerating prices of commodities which led to price increases a year ago to begin with, now just roughly returning to normal levels.
If that is the case, then the market is clearly reading this piece of news incorrectly. As you push down the price, you automatically increase the demand, that’s how this supply/demand curve operates. And so in this regard it’s really just about the reasoning behind it.
But as I said, if the reason is to just push down the prices to gain demand and potentially even market share of potential buyers that were considering other options and can now look at this and find it attractive while retaining margins, then this could actually be positive.
Based on Elon’s recent comments, this will likely come at the cost of margins, in order to push operating leverage even through downturn for later on, while squeezing competitiors that are already in this setup taking losses on their EV models.
ST bearish, long term very smart and likely beneficial for shareholders in my view.
I’ll have to rerun my model based on this information and the guidance we’ll be given on Q4 call to understand where my desired levels would be to add to my position. This seems like an interesting play emerging.