Tesla stock dropped in price due to fear of price cut

Tesla Shares Fall 6% Amidst Concerns Over Automotive Gross Margins

On Monday, Tesla's shares closed down 6%, with investors growing increasingly concerned about the company's automotive gross margins. This came after the company reported its first-quarter deliveries of 422,875 electric vehicles and production of 440,808 cars over the weekend.

Analysts have been warning about the impact of price cuts on the industry's profitability, including that of Tesla's. Toni Sacconaghi, an analyst at Bernstein, wrote in a note to clients, "We maintain that price cuts have and will undermine industry profitability (including Tesla’s)."

Tesla has been making price cuts in recent months, with CEO Elon Musk tweeting in February that the company was reducing the price of its Model 3 to $35,000. This move was aimed at making electric vehicles more affordable for a wider range of consumers, but it has also put pressure on the company's profitability.

Despite the concerns about gross margins, Tesla's first-quarter delivery and production figures are impressive. The company delivered 184,800 Model 3 and Model Y vehicles and 238,075 Model S and Model X vehicles during the quarter.

Tesla's focus on electric vehicles has put it at the forefront of the industry, and the company has been driving innovation in this space for years. However, as the market for electric vehicles becomes more competitive, the company will need to balance its commitment to affordability with its need to maintain profitability.

In the coming months, investors will be watching closely to see how Tesla manages this balancing act. As electric vehicles become more mainstream, the company will need to continue to innovate and offer competitive pricing while also ensuring that it can turn a profit. Only time will tell if Tesla can continue to lead the way in the electric vehicle market while also maintaining its financial health.