The move, created to partially offset a reduction in the federal tax credit for its electric vehicles, underscored the key challenge in what is likely to be a pivotal year for the company and its chief executive officer.
The price cut of $2,000 beginning on Wednesday on the Model 3 - as well as on its higher-priced Model S and Model X - took the market by surprise and weighed on the stock, pushing it down 9.4 percent in morning trading.
Tesla previously gave investors hope that its production rates would improve, saying that the number of labor hours to build the Model 3 fell by more than 30 percent from the second to the third quarter.
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. "We also believe the $2,000 price cut to help subsidize the lower EV tax credit is a move that was not fully expected". The Model 3 might be the most affordable option, but its $35,000 still puts it slightly out of reach for the masses.
But the price cut of $2,000 on the model took the market by surprise and weighed on the stock, pushing it down 9.4% in morning trade on a broadly weaker day for U.S. markets.
Tesla plunged after disappointing Model 3 deliveries and an across-the-lineup price cut prompted concerns that the carmaker may bump up against a ceiling for demand.
Tesla boosted production during the quarter, churning out 86,555 vehicles, up 8 percent from 80,142 during the third quarter, the company said.
Mr Hyett estimated that if Tesla continues to deliver cars at the same rate, the price cut will mean $700 million in lost revenue in 2019.
While fourth quarter Model 3 deliveries of 63,150 topped the 56,065 Tesla made in the third quarter, it fell just short of the 63,700 analysts expected, Bloomberg reported. "I don't expect that Tesla operates in the black in 2019", said Frank Schwope, an analyst with NORD/LB.