Shares of Tesla (NASDAQ: TSLA) were up in pre-market trading on Monday after the EV major raised the price of its Model Y in the U.S. This move follows after the Federal Government raised the price ceiling on crossover electric vehicles eligible for tax credits. The hike in prices comes after TSLA slashed its prices in the U.S. and Europe last month.
The company’s Model Y with the Long Range version will now cost $54,990, a hike of $1,500 while the Performance variant will be costlier by $1,000 at $57,990.
This change would result in an increasing number of consumers who can take advantage of tax credits worth $7,500. This is because the Inflation Reduction Act has broadened the definition of SUVs to include SUVs costing up to $80,000 to be eligible to receive the credits.
Interestingly, despite the new price hikes, a brand-new Tesla may still end up costing less than a used one. For example, while a new Tesla Model Y, including the price hikes, costs $59,490, the same 2022 model with a low mileage (a used one) is priced at $63,990 on online used car retailer Carvana’s (CVNA) website.
It seems that used car retailers like Carvana are finding it difficult to respond to TSLA’s price changes and tax credits.
TSLA’s Price Reductions in China are Working
It seems that the company’s price cuts in China are working as evidenced by its vehicle sales soaring 18% month-over-month in January.
Even Wedbush’s top-rated analyst Daniel Ives, a long-time TSLA bull, seems to be convinced of it as he reiterated a Buy rating and raised the price target to $225 from $175, implying an upside potential of 18.4% at current levels.
The analyst commented, “We are now seeing a noticeable turnaround for Chinese EV buyers favoring Tesla vs. domestic players (BYD, NIO, Xpeng). The price cuts have swayed 3 of every 4 EV buyers in China based on our survey work in China and Tesla’s unmatched ability to scale its production operations in China are meaningful to margin stability which are front and center for the Street.”
Analysts remain cautiously optimistic about TSLA stock with a Moderate Buy consensus rating based on 21 Buys, seven Holds and three Sells.