Tesla Motors to Reduce Price Tags Over the Next 3 Years

Tesla Motors

During the past year, the share price for Tesla Motors (TSLA) has climbed surely and steadily, but has hit a ceiling in the wake of recent events. The high-end electric car manufacturer has been banned from selling their cars in Texas and New Jersey, and litigation to ban the company is taking place in New York and Ohio. This could potentially put a huge dent in Tesla’s quarterly sales figures. Along with these setbacks, Tesla Motors is seeking to reduce the price tags on each model of their cars over the next 3 years.

Automobile manufacturers have pitted themselves against Tesla Motors and their sales methods. Tesla sells cars directly to customers with no dealership involved. A customer simply pays what Tesla asks for the car, and there is no bargaining process. Nobody makes a commission for the sale of a Model-S, which Tesla sells with a price tag of $69,000.

The sales dilemmas in Texas, New Jersey, New York, and Ohio have not phased Tesla Motors a bit. They are still committed to a general 3 year plan resulting in the construction and sale of over 500,000 cars per year. They project that their Model-S could be reduced in price from $69,000 down to $30,000 or $40,000. Tesla is currently negotiating with various states to construct their “Gigafactory,” a $5 billion dollar lithium-ion battery construction facility. It is estimated that Tesla Motors will use this facility to reduce the price tags of each model by dropping the unit price of each battery to less than half of the current price.

Shareholders in Tesla Motors have been reluctant to take part in the company’s enthusiasm during the first quarter of 2014. The share price has dropped 44.56 points from $265.00 down $220.44 during February and March. The consensus among shareholders seems to be that the company won’t be able to sustain their high sales figures as more states ban their direct sale method. Tesla continues to remind shareholders that they have sold every car produced so far, and they continue to project ever-increasing sales figures.

Judging from the way shareholders are handling the Tesla situation at the moment, it is probably safe to assume that the share price may wobble around for a while. The first quarter sales figures may put investors at ease, but the continued banning of all car sales in new states seems to have investors pulling their hair out. As it stands now, the “Gigafactory” is still on the drawing board, and the company’s current goal is to double their sales figures from 22,477 cars sold in 2013 to hopefully more than 40,000 in 2014.

The plan from Tesla Motors to reduce the price tags on their cars over the next 3 years may not garner any enthusiasm from investors. As the car maker reduces prices and more states ban car sales, investors see a trend that may drastically reduce revenue. Tesla may have lofty goals of mass-production, but there is little evidence to suggest that they will get there. To top things off, the car company does not seem to be properly dealing with the sales bans in New Jersey and Texas. It looks like the downtrend in share price may continue into the second quarter of 2014.

By Luke Sargent

Sources

The Wire
Forbes
CNN Money

5 Responses to "Tesla Motors to Reduce Price Tags Over the Next 3 Years"

  1. James Macdonald   April 12, 2014 at 2:17 am

    I live in Texas. I purchased my Tesla Model S from my living room. It was delivered to my front door. It is far superior to any car I have ever been in.I don’t think the car dealerships’ attempts to monopolize the market are going to work.

    Reply
  2. jordanstoneman   March 27, 2014 at 7:12 pm

    Can you fix the above article to make it accurate? Several of the responses here have suggested fixes. Can you improve it please?

    Reply
  3. Echo Delta   March 27, 2014 at 9:18 am

    This article is trash! As an investor and amongst others I know I give almost no weight to the US state quibbles about direct sales. Some are resolving the issue in a timely way and others will eventually come around. With Europe delivering and China deliveries on the horizon, New Jersey is immaterial (especially since you still can get the cars there).
    If you do an analysis you’ll see TSLA closely tracking NASDAQ (with added volatility). Luke Sargent, do your job!

    Reply
  4. Kerry   March 27, 2014 at 9:10 am

    Totally inaccurate story. Anyone living in those States can go online and order a Tesla Model S right now . They are NOT lowering the price of their cars, just introducing a smaller, less expensive car in 3 years. This story is slanted to look like Tesla is struggling. They are most certainly not. China I’d just now ordering the car and their sales alone may exceed sales in the US. Please publish better researched articles next time.

    Reply
  5. t   March 27, 2014 at 8:46 am

    This article is riddled with ignorance. They’re not planning to reduce the price of the model s by 50% (which would be ridiculous).. They’re launching a new gen 3 model that will fall into that lower price range. There’s a big difference in reducing margins significantly on an existing product versus launching another at a lower price point with commensurate margins to match. Do your research.

    Reply

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