Electric vehicle (EV) maker Tesla (NASDAQ:TSLA) has decided to cut the prices of its popular Models 3 and Y in China as prices of input raw materials cool and competition heat up. After subsidies, the Model 3 sedan will now cost RMB 265,900 (down from RMB 279,900), which is approximately $36,615. Similarly, the Model Y SUV will now cost much less at RMB 288,900, down from the 316,900 it was priced at earlier.
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Following the news, TSLA stock hit a new bottom of $198.59 in intraday trading on October 24 but ended the day down 1.5% at $211.25. Year-to-date, the stock has lost 47.2%.
Tesla’s stock price plunge is likely related to the recent speech by China’s re-elected President Xi Jinping. He stated that the government would focus more on political ideologies instead of economic growth, which also led to huge stock price falls in U.S.-listed Chinese stocks yesterday.
Recently, Tesla’s CEO, Elon Musk, cited that the Chinese economy may be experiencing recessionary trends, especially in the property markets. Moreover, Tesla faces stiff competition in the mainland from Warren Buffett-backed domestic automaker BYD Co. (OTCMKTS:BYDDF) and others including Nio (NIO) and Xpeng (XPEV). Tesla has promised to make blockbuster deliveries in the final quarter of 2022, and these steps also aim at meeting those targets.
Tesla reported record China-made EV deliveries in September, thanks to the recent upgrades at its Gigafactory in Shanghai. Despite facing COVID-19-related lockdowns in the third quarter, coupled with rising costs of input materials, costly logistics, and weakening consumer sentiment, Tesla has been able to drive robust sales and profit.
Is Tesla a Buy, Sell, or Hold?
On TipRanks, Tesla stock has a Moderate Buy consensus rating. This is based on 19 Buys, seven Holds, and four Sell ratings during the past three months. The average Tesla price target of $295.49 implies 39.9% upside potential to current levels.
