Tesla’s decision to slash its prices has wide-ranging implications across the electric-vehicle industry — and could trigger a price war. Tesla last Friday cut the prices of the Model 3 and Model Y in the US and Europe, which could help buyers qualify for more federal tax credits and boost sales volume. The Model 3 is Tesla’s entry-level sedan, while the Model Y is classified as a sport utility vehicle or crossover. Wells Fargo analyst Colin Langan wrote in a note Tuesday that “TSLA’s material price cut on Friday could lead to an industry-wide price correction.” He said the move would attract buyers who hadn’t previously considered Tesla, and other carmakers would need to respond. TSLA 1Y Mountain Tesla 12 Months Slide. Yet Tesla has the upper hand when it comes to being able to cut those prices, suggested Jefferies analyst Philippe Houchois. Jefferies has a buy rating on Tesla and a $180 price target, representing a 47% upside from Friday’s close. “An aggressive round of price cuts reverses the 2022 price hike and will confirm that Tesla has more levers to pull than any [original equipment manufacturer] Looking at opening margins, efficiencies and opportunities to take advantage of growth in cost and revenue management,” Hawkois wrote in a note on Tuesday. Tesla’s move comes even as existing automakers are raising prices, according to Bank of America’s analyst John Murphy highlighted.” EVs may have lower prices due to strong demand, higher demand, and higher prices,” Murphy wrote in a note on Tuesday. driving in volume and thereby accelerating the move away from internal combustion engine (ICE) vehicles.” The result of Tesla’s price cut. Ford EVs include the F-150 Lightning and Mustang Mach-E, while GM’s Bolt is expected to be joined by the Blazer EV and Silverado EV later this year. Tesla has strong profit margins compared to existing automakers, and room to lower prices further, said Murphy, who has a neutral rating on Tesla. If Ford and GM respond with 5% price cuts of their own, versus Wells Fargo’s 2.5% forecast, the bank’s A. Langen said the automaker estimates adjusted earnings before interest and taxes (EBIT) of about $3.5 billion. will fall. In addition, Ford and GM are building out EV capacity. Bank of America’s Murphy said they now have to re-evaluate those investments, given the potential for price erosion and therefore weaker margins. “We anticipate that F and GM will continue down the current path, but there is likely to be greater risk to margins than we previously expected,” he said. “Ultimately, these companies will have to find ways to make EVs even more cost-efficiently and focus on areas where they may have unique advantages, such as trucks and SUVs.” However, Societe Generale believes Tesla’s price cut has removed some of the mystery that surrounded it, and can focus attention on positive moves by legacy automakers. Ultimately, this could drive re-ratings for the likes of Mercedes-Benz, BMW, Volkswagen and Stellantis, analyst Stephen Reitman wrote in a note on Monday. “It’s not that Tesla has such a huge lead that it’s game over for legacy auto makers,” Reitman said. “2023 could be the year when the market starts to appreciate that some of the older automakers have what it takes to be very successful even in the world of zero emissions. Could spark renewed interest.” One clear winner from strong EV demand are auto suppliers, Bank of America’s Murphy wrote. Murphy’s latest report reacting to the Tesla decision did not highlight any specific beneficiaries among auto suppliers, but he currently maintains buy ratings on Adient and Lier. ‘Torn’ over TSLA analysts were also quick to point out that Tesla’s price cuts will no doubt affect its own bottom line. Bernstein analyst Tony Sacconaghi cut his 2023 earnings-per-share estimate to $3.80 from $4.96, saying Tesla’s lower prices would have a “huge” impact on Tesla’s economics. “We’re torn on TSLA’s stock,” wrote Sacconaghi, who has an underperform rating on the stock. His $150 price target represents 23% upside from Friday’s close. With the stock now trading near Bernstein’s 2050 discounted-cash-flow estimate of $120 per share, investor sentiment is poor and there could be limited downside risk to projections if the consensus numbers are reset appropriately. Yes, he said. That said, it’s unclear whether the consensus numbers will reset substantially and whether Tesla may still struggle with demand issues during the course of the year. Recent demand challenges also raise questions about whether Could the long-term forecasts for Tesla’s market share and margins be even higher,” Sacconaghi said in Tuesday’s note. — CNBC’s Michael Bloom and Lora Kolodny contributed reporting.