Tesla will report third-quarter earnings in about a week. Investors will be paying pay close attention to gross-profit margins amid falling prices for Tesla’s electric vehicles. Price cuts have been a theme of 2023 for the industry. It’s time for investors to ask management about something else: Where are the Tesla advertisements?
It isn’t working out that way. Tesla has cut prices by 17% to 27% on versions of its highest volume Model 3 and Model Y vehicles over the past 12-plus months. Before price cuts started, the Wall Street consensus estimate for 2023 deliveries was 2 million units. Now it’s 1.8 million units. A roughly 20% price cut yielded 10% fewer cars sold. That’s negative price elasticity.
That couldn’t have all been saved with ads, but the point is it’s time to try something else. Musk said he would try ads at the company’s shareholder meeting in May. No ads yet, though. To make a good, or better, ad, it would probably be more effective to focus on clear benefits of EV ownership or debunking some EV myths and concerns.