Europe auto stocks fall as Tesla cuts prices in the U.S.

© Reuters.

By Geoffrey Smith

Investing.com -- European auto stocks fell on Friday after another price cut by Tesla (NASDAQ:TSLA) reinforced fears that demand will weaken around the world in 2023.

Stellantis (BIT:STLA), the owner of the Jeep, Chrysler, and Fiat brands, lost 3.5%, while Volkswagen (ETR:VOWG_p) stock lost 3.4%, Mercedes Benz (ETR:MBGn) fell 2.4%, and BMW (ETR:BMWG) stock fell 1.6%, making them the four worst performers in the Euro Stoxx 50 index on a morning when European stocks were broadly higher in response to an improving inflation outlook in the U.S.

Late Thursday in the U.S., Tesla said it will cut prices for its mass-market Model 3 and the Model Y SUV Crossover, in an apparent move to sustain sales after the company missed Wall Street forecasts for deliveries in the fourth quarter. The news was the latest sign that Tesla - which during its startup phase had always had long waiting lists for its cars - is now encountering the same kind of demand problems faced by other mature auto companies.

A company spokesman quoted by Reuters styled the move as driven by a recent decline in input costs as supply chain bottlenecks eased.

"At the end of a turbulent year with interruptions to the supply chain, we have achieved a partial normalisation of cost inflation, which gives us the confidence to pass this relief onto our customers," a spokesperson for Tesla Germany said.

Any move by Tesla to lower prices is likely to hurt European carmakers, which have historically operated on relatively thin profit margins - especially Stellantis and Volkswagen. The price cuts announced by Tesla will qualify much of its product offering for the $7,500 tax credit introduced by the Biden administration last year to speed the adoption of electric vehicles. As such, it increases Tesla's competitiveness in the more price-sensitive areas of the market.

Notably, of all the European stocks in focus on Friday, it was the high-end Porsche (F:P911_p) - which makes no pretensions to affordability - that fared best. Porsche Preferred (ETR:P911_p) stock was down only 0.6% by 06:00 ET (11:00 GMT).