Tesla shares fall on price cut, soft Model 3 deliveries

3 car is displayed during a media preview at the Auto China 2018 motor show in Beijing

Tesla buyers will now receive $3,750 in tax rebates instead of $7,500, so the company trimmed prices by $2,000 to partially offset the lost credit.

Musk now plans to turn attention to filling Model 3 orders in Europe and China starting in February, which could help offset some of the potential drop in U.S. demand linked to the shrinking tax credit.

The Model 3, Tesla's mass market vehicle, saw sales of more than 145,000 past year, the company said.

While Tesla reported yet another historic quarter that saw the company delivering an average of 1,000 vehicles per day, Wall Street has not taken kindly to the electric auto maker's Q4 2018 results. The federal government only offers the tax credit to companies that have sold fewer than 200,000 plug-in vehicles. Analysts questioned whether the $2,000 price cut on all models signaled lowered demand in the United States, and ultimately whether the move would undermine nascent profitability at the Silicon Valley automaker, which has never posted an annual profit.

Shares in Tesla have slumped after the electric auto maker cut USA prices for all its vehicles to offset lower green tax credits and fell short on deliveries of its mass-market Model 3 sedans in the fourth quarter.

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The electric auto maker's shares tumbled more than 9 percent in morning trading. The company said it would begin delivering Model 3s to Europe and China in February. However, the company delivered just 63,150 Model 3s in the fourth quarter, missing analyst targets by 1,750 vehicles.

Tesla delivered 90,700 vehicles during the fourth quarter, a new all-time high, closing the year with a total of 245,240 deliveries compared to 102,807 in 2017.

Tesla boosted production during the quarter, churning out 86,555 vehicles, up 8 percent from 80,142 during the third quarter, the company said.

There remain significant opportunities to continue to grow Model 3 sales by expanding to worldwide markets, introducing lower-priced variants and offering leasing. Tesla had previously stoked investor optimism by claiming that improvements in efficiency had reduced the number of labor hours needed to build the Model 3 by 30 percent. This is despite the electric auto maker only producing mid and high-priced variants for the Model 3, and deliveries only being exclusive to North America.

Tesla's achievements in 2018 likely represent the biggest single-year growth in the history of the automotive industry. Additionally, 2018 was the first time in decades that an American auto - the Model 3 - was the best-selling premium vehicle in the USA for the full year, with US sales of Model 3 roughly double those of the runner up.

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