Tesla Bear Gordon Johnson: EV Price Cuts Point To Softening Demand

Tesla Inc TSLA announced another round of price cuts for its EVs this week, triggering a swipe from a longtime bear.

The Tesla Analyst: GLJ Research's Gordon Johnson has a Sell rating on Tesla shares with a $67 price target.

The Tesla Thesis: Tesla has now reduced the prices of its cars 13 times in 2021 alone, with softer demand and a competitive threat responsible for the move, Johnson said in a Thursday note.

In the most recent round of cuts, prices of the Model 3 SR+ car in Japan have been lowered by 16% or $7,800; the Model 3 LR car in Japan by 24% or $14,800; the Model 3 SR+ in the U.S. by 3% or $1,000; and Model Y SR prices by 5% or $2,000, the analyst said.

These four cuts follow nine prior cuts made this year, he said.

Tesla had excess inventory in the fourth quarter and has never been able to sell out its production capacity, Johnson said.

Deliveries data released by the company showed that it produced 509,737 vehicles in 2020 and delivered 499,550 units.

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"We see the company as currently demand constrained rather than production constrained," the analyst said. 

This is the primary reason behind Tesla's price cuts and the 471-basis-point contraction in its fourth-quarter automotive gross margin, excluding one-time credit sales, he said. 

Given the anticipated entry of 40 new EV entrants in 2021 and Tesla's market share losses in the EU and China, this year will be the one when it becomes evident that Tesla is not the global leader in the EV space, Johnson said.

TSLA Price Action: At last check, Tesla shares were down 0.99% to $790.21.

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Photo courtesy of Tesla.