BENGALURU, INDIA – Tesla’s stock took a sharp hit on Monday, dropping over 3% amidst concerns on Wall Street regarding the company’s shrinking profit margins leading up to its upcoming earnings report. The electric vehicle maker implemented price cuts of up to $2,000 on models like the Model 3 and Model Y in various markets such as the U.S., China, and Germany to stimulate demand affected by high interest rates.
The price reductions come just before Tesla’s quarterly earnings report scheduled for Tuesday. Analysts anticipate the company, being the most valuable automaker globally, to reveal its first revenue decline and the lowest gross margin in almost four years. CEO Elon Musk’s recent decision to eliminate 10% of the company’s workforce and emphasize the importance of autonomous driving has left investors seeking clarity on Tesla’s future direction.
Earlier this month, Musk stirred controversy by announcing plans to unveil a “Robotaxi” in August, following reports that Tesla had shifted focus from developing an affordable electric vehicle to prioritizing robotaxis. Despite denying the reports, Tesla’s shares have lost over 40% in value this year, with market experts attributing the decline to Musk’s political affiliations and controversial public statements deterring potential buyers.
The latest drop in Tesla’s stock price on Monday was poised to wipe out nearly $20 billion from its market capitalization of $468 billion, based on outstanding shares. While Tesla remains the world’s most valuable automaker, Toyota has been gaining ground due to growing demand for its hybrid vehicles. The Japanese automaker currently holds a market capitalization of $306 billion, as of its most recent closing.
With expectations high for Tesla’s earnings report, analysts view this as a pivotal moment in the company’s history. Dan Ives from Wedbush Securities described the upcoming earnings as a “moment of truth” for Tesla. As investors await insights from Musk on the company’s strategic direction, the electric vehicle market continues to evolve amid increasing competition and technological advancements.