By Urvi Manoj Dugar
(Reuters) -Tesla has cut U.S. prices of its Model 3 compact sedan and the Model Y SUV, ratcheting up its price war just days after the third-quarter deliveries of the world's most valuable automaker missed market expectations.
The latest cuts come as the company strives hard to deliver a record 476,000 vehicles in the last three months of 2023 to meet the annual target of handing over 1.8 million vehicles.
The price cuts by Tesla (NASDAQ:TSLA) - now by about 2.7% to 4.2% - started in January to support sales in an uncertain economy and fend off competition from U.S. automakers such as Ford (NYSE:F) and China's BYD (SZ:002594).
Tesla shares fell 2.1% amid broader market weakness and on fears that the cuts will further dent the company's industry-leading margins, which plumbed a near four-year low in the April-June quarter.
The standard Model 3 sedan is now $1,250 cheaper at $38,990, while the Model Y long-range variant costs $2,000 less at $48,490, the automaker's website showed.
Tesla also cut prices for its higher-priced variants of the two models.
Overall, the standard Model 3's prices have come down by about 17% since the start of the year, while the Model Y long-range variant has seen a drop of over 26%.
The price cuts will also add pressure on the "Detroit Three" as they deal with an unprecedented strike by autoworkers' union.
Any new contract with the union is expected to drive a surge in costs, benefiting non-unionized automakers such as Tesla and Japan's Toyota (NYSE:TM).
Tesla is set to report third-quarter earnings on Oct. 18.
Analysts polled by Visible Alpha expect the company to post automotive gross margins of 19.1% for the quarter, which is a large drop from a record margin of more than 32% in the first quarter last year.