With third-quarter earnings days away and the Detroit Three locked up in ongoing strikes, (TSLA) -) Tesla's continued dominance in the electric vehicle market is all but assured. But investors are not entirely pleased with the company's (dwindling) market share and current trajectory; the EV price war continues, and Tesla seems determined to win it at all costs.
Average Tesla prices are down more than 25% for the year, according to Cox Automotive. These price cuts, Gary Black, a managing partner at The Future Fund said, amount to Musk's approach to advertising. The issue for Black is that it creates a loss without addressing the root cause of the problem Tesla is currently facing.
Related: Tesla stock slips as the electric vehicle leader faces a big new problem
Further price cuts will do "absolutely no good" if the majority of Americans are still bogged down by concerns over EV costs and range anxiety, Black said. Until that gap is bridged and the majority of people are made aware that a Tesla is "cheap to maintain" and "fun to drive," the ongoing price cuts are doing little but cost the company revenue.
Every thousand-dollar price cut, Black said, is worth $2 billion in revenue in 2024.
I agree with Gary 💯. This is basic first principles thinking. Tesla cars are not just vehicles that takes a person from point A to point B. There is so much value and life changing rich features that ordinary consumers will never understand until they have driven it on a…
— Totoy Martizano (@formytots0128) October 15, 2023
Though Tesla's Chief Executive Elon Musk has made clear in the past that he hates advertising, he did concede in May that Tesla would "try a little advertising and see how it goes.”
Despite this cautious assertion, Tesla hasn't made a very significant advertising push, according to Wedbush analyst Dan Ives. Yet the price cuts have continued, costing the company more than $2 billion in revenue over the past year.
Tesla did not respond to TheStreet's for comment.
"I’m not asking that Tesla spend (money) on advertising that it could spend on product quality, engineers or battery technology," Black said. "I’m asking that Tesla take 5-10% of the billions it will spend to cut price and try advertising to educate non-EV users why they should buy an EV.
Related: Elon Musk's Tesla just got into a weird new business
"Once you go EV, you never go back."
Shares of Tesla, up 103% for the year, have been falling recently, previously closing at $251.12. The stock fell slightly in pre-market trading.
Tesla is set to report earnings Oct. 18.
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