Is Tesla's Demand Starting To Dry Up? Analyst Says Recent Price Cuts Are A Warning Sign

Tesla Inc. TSLA announced a fresh round of price cuts on Tuesday, triggering concerns among investors.

An analyst, however, said the price move was expected and detailed three reasons for the cuts.

Anemic Volume: The six-month year-over-year deliveries growth was 33.9%, the lowest since the COVID-19 pandemic, said Future Fund's Gary Black. Tesla missed the fourth-quarter deliveries estimate and the first-quarter number was about in line with expectations. Combined numbers for the fourth quarter and the first quarter of 2023 stood at 828,153 units.

Falling Lead Times, Order Backlogs: The fund manager noted that the company's order backlogs and delivery wait times fell below December 2022 levels, the timing before the company began cutting prices in the U.S.

Elevated Inventories: Inventory levels in the U.S. and Europe were quite elevated, the analyst said.

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"We see the new cuts as more evidence that TSLA's order backlog has dried up, and rather than cut production, TSLA cut price again," Black said.

Tesla ended Wednesday's session down 2.02% at $180.59 in reaction to the price cuts. In after-hours, following the release of the first-quarter earnings report, the stock fell an incremental $6.07% to $169.63, according to Benzinga Pro data.

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