Tesla stock falls after Model Y, Model 3 price cuts in China

Yahoo Finance Live anchors discuss the decline in stock for Tesla following the slashing of prices for its Model 3 and Model Y vehicles.

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BRAD SMITH: Tesla cut the prices-- in a different story that we're tracking here, Tesla cut the prices of its Model 3 and Model Y cars in China by over 10%, after deliveries of its China-made vehicles plunged in December. This is the EV maker's second time in less than three months that it's slashing prices.

Now, a few things have taken place within that time frame. Number one, is the production. And of course, we got some of those production and delivery numbers. I think Tesla is really just looking for people to take delivery. That's one issue.

But then, additionally, it's a number of the credits that are gonna continue to be rolled out, too. And the extension of some of those credits, that makes financing even more possible for some people. So now that you've got another cut on top of the credits, on top of just trying to get people to take delivery, that's spelling out some serious issues that investors might be paying close attention to here on the day, which is why shares are moving lower.

BRIAN SOZZI: Maybe Paul Meeks was on to something, Tesla hitting $29 a share. He came on-- obviously, we're not making a stock call here. But, look, the problem here with this is this reaction in the market to Tesla, the premarket, has nothing to do with what Elon Musk is doing on Twitter. This is purely fundamentals, as it pertains to Tesla. Them cutting prices, probably putting their margins at risk in a key market like a China.

We're also seeing pressure on a NIO and an XPeng, Tesla China rivals. And I would be more concerned about this market reaction than necessarily whatever is happening over there at Twitter, at least for right now because that's what the stock is trading off.

JULIE HYMAN: I mean, it might have nothing to do with Twitter. It might have to do with the short interest in the stock, which has been climbing, right? That is something that could potentially be exacerbating this, that there is definitely a financial interest on the part of some investors for the stock to continue to go down.

That said, obviously, there's also the fundamental case of what's going on here for the company now cutting the prices for the second time on these China vehicles on what is a really substantial market. By the way, they also cut prices in Japan by 10% so that's something to consider, too. It's not just in China.

And one more point here that my pal Tom here made over on Twitter is that the man who oversaw China, and still oversees China, by the way, his purview was just extended. That's Tom Zhu, who just got a promotion, is now overseeing North America as well. After what we're seeing in China, it's kind of an interesting choice here to expand that person's role.

BRAD SMITH: Just lastly and add on to this, too. At some of the price ranges that we're talking about here and it being down from the $38,000 figure that we had seen previously for the Model 3. $42,000 used to be that marker where if you saw the average selling prices dip below that, Tesla was actually taking a loss on every single vehicle.

And so now this is a profit margin story as well. And any hit to the free cash flow for a company like Tesla, too, going into a recession where there is fear around some of the car sales and moving through some of the produced vehicles, I think, investors trying to get ahead of that.

BRIAN SOZZI: And there's no stock buyback.

JULIE HYMAN: I mean--

BRIAN SOZZI: There's no stock buyback at Tesla.

JULIE HYMAN: --I think that is the TBD. Because I think Musk has said that their operating efficiencies have improved on the vehicles, but I don't know to what extent. But so that--

BRAD SMITH: Yeah.

JULIE HYMAN: --that, to me, is something we still need some more information on.

BRAD SMITH: Sure.