Tesla's share price
dip over 7% on Friday. The stock was halted yesterday because the company had
some big announcement; however, I think the so-called big announcement was
rather disappointing. Tesla announced that it would close most of its
brick-and-mortar stores and lower the price of its Model 3 and would not turn a
profit in the first quarter.
The
profitability of Tesla has always been a concern of the market. We cannot
expect a newly established firm to be profitable from its early stage. In the
auto industry, Tesla is a new company; however, in the EV sector, Tesla has
been a leader in the sector, so its profitability has been in the market focus.
The profitability concern definitely was the biggest
drive for today's fall.
The
decision of moving sales to online is not something that new. Many companies
have tried some similar strategies, since online stores can reduce some costs.
Morever, Tesla wants to be more capable of delivering cars to its customers as
soon as possible, moving sales to online can help to improve the capability.
The
reason for Telsa to lower its Model 3's price I think is largely because it is
facing rapidly increasing competitions from other companies, including Volvo,
Volkswagen, these traditional auto companies. Lowering prices without
significant cost reduction will affect Tesla's profitablitym unless it can
create a significant increase on its sales.
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