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Tesla ( TSLA ) bull Cathy Wood doesn’t see the electronics maker’s recent price cuts hurting the brand. Instead, they could be more of a problem for automakers trying to close the gap, he argued.

“I think traditional automakers will have a hard time keeping up with the price cuts that Tesla’s technology allows,” the ARK Invest founder said on Yahoo Finance Live (video above).

Wood believes the price cuts stem from Tesla’s cost leadership in battery technology. Tesla remains Wood’s largest holding in the ARK Innovation ETF ( ARKK ).

Cathy Wood, founder, CEO and director of ARK Invest, speaks at the 2022 Milken Institute Global Conference in Beverly Hills, California, US on May 2, 2022. REUTERS/David Swanson

Elon Musk “absolutely picked the right technology, and I think others are rethinking it now,” Wood said. “If they don’t switch to this type of battery technology, they won’t be able to catch up to Tesla in terms of price drops without losing money, while Tesla’s gross margins will likely continue to rise on balance even if they do. lowers prices because its unit volumes—the economies of scale—will be so significant.”

In early January, Tesla cut the base Model 3 by $3,000 to $43,990. The price of the Model 3 Performance variant has dropped by $9,000 to $53,990.

Tesla also dropped the price of the Model Y Long Range by $13,000 to $52,990, while the Performance model was cut to $56,990, about $13,000 cheaper than the previous price.

EV rival Ford ( F ) has followed suit by cutting its own prices to better compete with Tesla. Although GM ( GM ) CFO Paul Jacobson told Yahoo Finance this week that he has no plans to cut electric prices.

According to Wood, the price cuts appear to have led to renewed demand (and perhaps increased market share) for Tesla, something CEO Elon Musk alluded to in the company’s recent earnings call.

But not everyone on Wall Street shares Wood’s optimism about Tesla.

Many experts believe that the price cuts will hurt the Tesla brand in the long run and hurt profit margins at the same time.

“Based on the statement that [Elon Musk] On the fourth quarter earnings call, saying its demand is 2x its supply, you’d be a fool to cut prices,” BofA analyst John Murphy said on Yahoo Finance Live. In the near future, the volume will increase.”

Brian Sozzi is a great editor and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi: and on and on LinkedIn:.

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