Tesla Investor Says 'Short-Term Narcotic' Price Cuts Won't Work: 'Sad That..Mgmt Doesn't Get This'

Tesla Inc.'s TSLA sharp Model S, X price cuts in the U.S. this week triggered a backlash from even some of the staunchest backers of the company.

What Happened: Price cuts are a “short-term narcotic” that trains potential customers to wait for further price cuts, said Future Fund Managing Partner Gary Black in a post on X, formerly Twitter.

The fund manager reiterated his long-held view that advertising works over the long term to educate would-be buyers why they should buy EVs and what differentiates Tesla from other electric vehicles.

“Sad that $TSLA mgmt doesn't get this,” Black, whose flagship Future Fund Active ETF FFND has Tesla as its second biggest holding, said.

Black’s comments came in response to a post by a Tesla influencer who lamented that the Model S, X were now way too cheap for the value they bring. Quantifying the impact, he said the price cuts cost $15,000 per car, on average. With Tesla selling about 18,000 S/X for a quarter, the lost sales would be $270 million per quarter and over $1 billion on an annualized basis.

If Tesla had earmarked a fraction of that $1 billion on creating awareness and increasing organic demand, the company can see a volume boost, he added.

See Also: Everything You Need To Know About Tesla Stock

Why It's Important: The negative reaction to the price cuts was evident from the stock price on Friday. Tesla shares settled Friday's session down 5.06% at $245.01, according to Benzinga Pro data.

In comparison, the tech-heavy Nasdaq Composite and the Invesco QQQ Trust QQQ, an exchange-traded fund that tracks the performance of the Nasdaq 100 Index, fell 0.02% and 0.11%, respectively.

Tesla's sharp pullback came despite the company launching the Model 3 refresh, the first major upgrade of the Model 3 EV sedan it first launched in 2017.

The price cuts are in line with the thinking of Tesla CEO Elon Musk, who suggested on the second-quarter earnings call that he is willing to sell cars at zero profits and bid his time for reaping a windfall by selling the high-margin full self-driving software suite.

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Read Next: Tesla Offers Deep Discounts On Inventory Model 3 EVs In US, Canada Even As Stock Stutters Amid Price Cuts

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