Tesla (TSLA) -) shares moved lower after the carmaker unveiled further price cuts in China amid an ongoing price war in the world's biggest car market.
Tesla lowered the price of its long-range Model Y by 14,000 yuan, or 4.5%, with a near 4% markdown for its Model Y performance sedan. Tesla also offered insurance subsidies to domestic buyers valued around 8,000 yuan ($1,100.00).
The China Passenger Car Association said last week that domestic vehicle sales fell 2.6% last month from July of last year, with 1.79 million units changing hands. Tesla, the CPCA said, sold 64,285 vehicles, a 31% slump from June and a 16.5% slide from July of last year.
Despite recent tweaks to the upside, prices for the Model Y midsize SUV are down around 24% since the start of the year in the U.S., with the prices for the popular Model 3 sedan down 14%. Earlier this month, in fact, Tesla unveiled a series of rebates for buyers in the U.S., China and Europe as part of its "Refer and Earn" program.
Tesla Chief Executive Elon Musk told investors last month that "it does make sense to sacrifice margins in favor of making more vehicles because we think, in the not too distant future, they will have a dramatic valuation increase." He said Tesla would continue to focus on winning market share, as opposed to widening profit margins, over the back half of the year.
Tesla shares were marked 1.5% lower in early-afternoon trading Monday to change hands at $239.06 each, a move that would extend the stock's two-month decline to around 7%.
Last month the Austin group posted better-than-expected second-quarter earnings, while holding profit margins wider than Wall Street forecasts, even as the carmaker's price cuts continued to pare its overall bottom line.
Adjusted earnings were up 20% from a year earlier to 91 cents per share, while revenue surged 47.2% to a record $24.93 billion.
Adjusted automotive margins were 18.7%, Tesla said, up from the 18.3% figure recorded over the first quarter but down from last year's second quarter tally of 22.4%, following a series of price cuts in its biggest global markets. Wall Street forecasts hovered between 17.5% and 17.9%.
Gross margins were 18.2%, narrowed from 25% over the year-earlier period and 19.3% over the first quarter.
- Get investment guidance from trusted portfolio managers without the management fees. Sign up for Action Alerts PLUS now.
