Tesla TSLA shares slipped lower Monday following a report that suggests the clean-energy carmaker is close to unveiling plans to produce a low-price EV in Germany.
Reuters reported Monday that Tesla, which has been keen to develop the production technology required to build a low-cost EV, would use the existing Berlin gigafactory to produce a car that would sell for as little as €25,000 ($26,872), a level that's less than half the region's average price of €65,000 and well south of the cheapest Model 3 sedan at €43,000.
Tesla CEO Elon Musk hinted at the plans during a Friday visit to the group's factory in Gruenheide, around 15 miles southeast of Berlin, Reuters reported.
Tesla has been keen to win market share in the fast-developing, but increasingly competitive, global EV market. Musk warned investors earlier this year that he was prepared to put the carmaker's reach ahead of near-term profits in order to do so.
Since then, Tesla's overall profit margins have narrowed considerably and were last pegged at 16.1% for the three months ended in September. That's well below the 18.7% figure recorded over the first quarter and the year-earlier second-quarter tally of 23.2%.
Gross margins were 17.9%, down from 25.1% over the year-earlier period and the 18.2% figure recorded over the second quarter. Wall Street forecasts hovered between 17.8% and 18.2%.
Musk: Higher interest rates hinder sales
Musk has also lamented the sharply higher interest rates in key markets, particularly in the U.S., as holding back potential sales. In that respect a lower-priced car could neutralize the impact of higher rates and boost affordability, while simultaneously helping the group's pursuit of more market share.
Still, Tesla is not immune to pressures on input costs, especially with respect to labor, which could also challenge its efforts to ramp up production in coming years.
Musk unveiled a 4% pay rise for Berlin workers on Friday, which with bonuses takes the increase to around 18% over the past year and a half, as the group continues to face pressure from union leaders in both Germany and the broader European Union.
Tesla pay also sits well below competitors such as Ford F and General Motors GM, both of which late last month inked big pay deals with the United Auto Workers union.
UAW President Shawn Fain, in fact, told Bloomberg News last week that putting together a collective of Tesla workers in the U.S., even with Musk's vocal antiunion stance, was "doable."
“Hopefully we get down there, we organize them and they become UAW members ... and they can realize the full power of membership and get an even better contract," Fain said.
Tesla shares were marked 1.8% lower in early afternoon trading Monday, against a 0.15% dip for the Nasdaq, to change hands at $216.00 each.
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