Tesla CEO Elon Musk would ‘be silly’ to slash prices again, analyst says

Investors are hoping Tesla’s (TSLA) price-cutting ways have run their course for 2023.

“Based on the statement that [Elon Musk] made on the fourth quarter earnings call, saying that his demand is 2x his supply, you’d be silly to cut price,” BofA analyst John Murphy on Yahoo Finance Live (video above). “You would just be eating into your profitability and not achieving any more incremental volume in the near term.”

Earlier this month, Tesla cut the Model 3 base version by $3,000 to $43,990. The Model 3 Performance variant saw a price cut of $9,000 to $53,990.

SpaceX owner and Tesla CEO Elon Musk arrives on the red carpet for the Axel Springer media award, in Berlin, Germany, Tuesday, Dec. 1, 2020. (Britta Pedersen/Pool via AP)

Tesla also dropped the price for the Model Y Long Range by $13,000 to $52,990 while the Performance model was cut to $56,990, about $13,000 cheaper than the previous price.

EV rival Ford (F) followed with price cuts of its own to better compete with Tesla. GM’s (GM) CFO Paul Jacobson told Yahoo Finance on Tuesday he has no plans to cut prices for its EVs.

The price cuts appear to have led to renewed demand for Tesla, as hinted at in the company’s latest earnings call by Musk.

In turn, Tesla shares are closing in on a sizzling 40% gain for January as investors bet on strong profits in coming quarters from the uptick in sales volume.

BofA’s Murphy says Tesla should just sit back and benefit from its price cuts instead of racing to the bottom.

“I think there’s a risk of another price cut in 2024,” Murphy said. “But if we hear another one this year, it doesn’t seem very logical to us at all and really puts into question whether the industry and its executives are making rational decisions.”

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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