EV - Tesla Stock: Are Price Reductions a Warning Sign?

January, 13 2023 02:33 PM Eaton Vance Corporation

Tesla Stock ( NASDAQ:TSLA )

Tesla, Inc. ( NASDAQ:TSLA ) announced on January 12 that the prices of four of its car models would be going down. The announcement comes after a time when people in its home country bought fewer of its cars and when competition from traditional automakers grew.

The average discount was about 20%, most of which were made so buyers could get the $7,500 tax credit the government gives for cars that cost less than $55,000. The Model Y Long Range price has gone down from $65,990 to $52,990, which puts it just under the threshold.

Only Tesla bears will be happy about the news. Recent customers who paid the higher price will be angry, as will investors, who will now worry that margin compression and overall demand destruction were worse than they thought. (Not to mention the many companies with fleets of cars that got Tesla electric vehicles (EVs) for free for their fleets.)

It’s not surprising that a company whose CEO called its factories “giant money furnaces” is in big trouble now that consumer demand has dropped. The news doesn’t come as a surprise since Tesla said it would lower prices in China. Last week, a Model 3 was 30% less expensive in China than in the U.S. With the news from today, the gap has gotten a little smaller.

How China Began

China has been a source of optimism for investors for a long time. The company’s Shanghai factory and access to a seemingly endless supply of Chinese consumers who want Tesla products are seen as its most promising frontier. Like many other American companies that have tried to do business in China, Tesla and its investors have found it risky. Tesla has a lot on its plate, from shutdowns ordered by the government to EV makers backed by th...

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Company Name:	Eaton Vance Corporation
Stock Symbol:	EV
Market:	NYSE