Tesla (TSLA) shares closed down 1.12% on Tuesday, April 4, after plunging 6% on Monday, as the EV company's quarterly delivery report left some investors concerned that further price cuts would be needed to boost sales, which would erode profit margins.

Over the weekend, Tesla reported that it shipped 422,875 electric vehicles in the first quarter and produced 440,808 vehicles. The record numbers showed a 4% increase in shipments over the previous period, following multiple price cuts in the US, China and Europe. It looks Tesla has indeed entered a much more competitive environment as more and cheaper analogues keep entering consumer markets, while workers’ salaries get diluted by persistent inflation.

Some discounts have been introduced in the U.S., in part to allow Tesla and its customers to take advantage of tax credits provided by the Inflation Reduction Act. However, a lingering concern is that, as new electric vehicles continue to hit the market, increased competition will force the automaker to cut prices even further if it wants to attract buyers.

Although, unlike broader market indices, Tesla shares haven’t yet entered the bear market, and its valuations at EV/EBITDA at 50x and P/S at 11x are still at the upper band of acceptability range, any new signs of impending recession, given the EV maker’s cooling pricing and, hence, lowering margins, can potentially lead to heavy losses of the stock.