Goldman Sachs cautions Tesla $TSLA and Rivian $RIVN against hasty price reductions, emphasizing the need for careful consideration. Analyst Mark Delaney’s analysis indicates that both companies should approach additional price cuts in the U.S. cautiously, particularly as Tesla’s Model 3/Y is already within the budget of many American consumers, and Rivian primarily caters to a less price-sensitive market with vehicles priced at around $70,000 and above.
Delaney highlights the potential risk of broad-based price reductions, noting that while a 1% price reduction typically leads to a modest increase in volume in the mainstream market, applying similar cuts to the Model 3/Y could negatively impact profit dollars in the short term. Despite this caution, Delaney maintains a price target of $220 for Tesla and $13 for Rivian.
In summary, the analysis suggests that both Tesla and Rivian should exercise prudence in adjusting prices, taking into account the unique dynamics of their target markets and the potential impact on profitability.
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