Tesla selloff on Model 3 delivery news overdone, analyst says

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(Reuters) - Tesla Inc TSLA.O on Wednesday cut USA prices for all its vehicles to offset lower green tax credits, and fell short on quarterly deliveries of its mass-market Model 3 sedan, sending shares of the electric vehicle maker down almost 7 percent on worries of future profitability.

According to Reuters' own calculations, Tesla gained around $3,200 per vehicle delivered in pre-tax earnings. In the days leading up to New Year's Eve, CEO Elon Musk took to Twitter in an effort to encourage potential customers to pull the trigger before the deadline, but didn't mention the pending price reduction. The price for this rear-wheel-drive drive model was briefly cut to $45,000 in October, but it was increased by $1,000 just days later. Investors perceived the news as a signal of a low demand for Model 3s, which immediately sent Tesla's shared down 2 percent.

It will be a few more weeks before Tesla confirms whether it was profitable for a second consecutive quarter, but the company's ability to sustain a high level of production - it built 61 394 Model 3s and 86 555 vehicles total in the last three months - will go a long way toward that goal.

Gary Gastelu is FoxNews.com's Automotive Editor. But some bearish investors are likely interpreting it as a move to stimulate demand, said Wedbush analyst Dan Ives.

"The mission is to get electric vehicles on the road at the lowest price point without sacrificing margins", he said, adding that he sees "unlimited demand" for the more affordably priced $35,000 Model 3, even without the government rebate.

Tesla stock (NASDAQ:TSLA) has fallen more than 7% on Thursday's trading, partly due to the company's 63,150 Model 3 deliveries falling slightly short of FactSet estimates of 64,900.

Tesla also produced a total of 25,161 Model S and X, which is consistent with its long-term run rate of around 100,000 units per year.

Tesla will be announcing its Q4 financials later this month. Tesla said fourth-quarter deliveries were eight per cent higher than its previous high in the third quarter of 2018. Global deliveries to Europe and China will start next month and it will launch a right-hand drive version later in the year.

Tesla will try to disguise the price cuts with the disappearing tax credit or discounts for buyers who refer other customers to Tesla, Ramsey said.

Tesla's vehicle deliveries fell short of Wall Street analysts' expectations as the Silicon Valley automaker wrestles with the realization that its federal tax credits are quickly running out.

The 63 150 Model 3s Tesla handed over to customers in the fourth quarter trailed the roughly 63 700 average analyst estimate.