Why BoA analysts believe Tesla’s latest price cuts will drive volume growth in 2023

Bank of America analysts shared their stance, that Tesla’s recent price cuts to its lineup of vehicles would likely result in higher sales volume growth this year. 

Tesla has caught headlines recently after the company initiated a round of steep price reductions for its lineup of vehicles. The price cuts are expected to help the company gain more orders for its electric cars. 

The analysts pointed out that although the drastic price cuts, which range from 6% to 20%, would probably reduce the profits for the Model 3 sedan and Model Y crossover, the strategy might lead to a 53% rise in sales for Tesla in 2023. 

For instance, the Model Y crossover’s price fell the most, from its starting point of $65,990 to just $52,990. Additionally, because of the price drop, it is now qualified for a $7,500 US federal tax credit. This implies buyers can now save over $20,000 on the most well-liked EV in the US.

The strategists also pointed out that, despite being arguably unique among its rivals in the EV market, Tesla’s self-funding position is less noticeable among competitors from legacy auto. The whole EV market could be negatively impacted by potential headwinds like a negative macro environment, rising interest rates, and a potential recession.

The company predicted that Tesla might make between 10% and 20% less per vehicle sold with the pricing cuts in effect. Additionally, the Bank of America analysts modified their forecasts for this year and 2024’s earnings per share. Overall, according to Bank of America, Tesla is appropriately valued, despite Elon Musk’s distractions from his Twitter purchase. As a result, the company kept the stock’s “Neutral” rating.

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