Warning: Electric Vehicle Rip Will Fade Lower

When Tesla (TSLA) briefly halted production in China and cut prices, shares plunged. The stock traded as low as $101.81 before climbing toward $200. Markets realize that Tesla’s price cut has multiple advantages.

Competitors, including Ford (F) and General Motors (GM), face severe headwinds in their EV business. Costs will keep rising as they cut prices to compete. People are talking about buying Tesla EVs again. In addition, at a lower price point, Tesla buyers qualify for a U.S. tax break.

Q4 Results

In Q4, Tesla posted revenue growing by 37.2% Y/Y to $24.32 billion. Gross margin declined slightly, capital expenditure increased by 2.8% and free cash flow halved to $1.42 billion.

After Tesla’s price cut, competitors will likely face lower order bookings. When its sales top 1.8 million in 2023, consumers are more likely to consider a Tesla over those offered by Fisker (FSR), Polestar (PSNY), or Lucid Motors (LCID).

Investors who missed Tesla’s run-up should not chase the stock from here. FSR and LCID stock are especially weak. Fisker did not bring a product to market. Lucid sells luxury EVs. Until it reaches mass production, higher sales growth will lead to more losses.