Tesla fired another shot in the EV price war, nearly doubling discounts on its luxury Model S and Model X vehicles in China on Wednesday. Meanwhile, Tesla's updated Model 3, code-named Highland, is set for an imminent release in China with some stores already taking reservations, according to local reports. TSLA edged lower.
Tesla is now offering discounts between RMB 54,000 ($7,400) and RMB 70,000 ($9,600) for customers in China buying inventory Model S and Model X vehicles, according to CnEVPost. On July 1, Tesla started discounts in China of RMB 35,000 ($4,800) to RMB 45,000 ($6,200) for Model S and Model X vehicles. The EV giant began importing its luxury offerings to China earlier in 2023 after a multiyear halt.
Meanwhile, Tesla's upgraded Model 3 is expected to go on sale in China within a month, local media China Securities Journal reported Wednesday. Tesla has already started accepting reservations for the new Model 3, according to the report.
TSLA fell 3% to 225.60 Wednesday during market trade. On Tuesday, Tesla stock dropped 2.8% to 232.96, a two-month low. Shares are down around 13% in August after seven losses in the past eight sessions.
This is the latest in a number of recent vehicle pricing moves by Tesla, signaling further pressure on profit margins.
The Pricing War Advance
Late Monday, Tesla launched new, range-limited versions of its Model S and Model X vehicles, slashing the U.S. price tag on its base luxury electric vehicles by $10,000.
On Sunday, Tesla cut Model Y prices on higher-end variants by $1,930 in China. Tesla left prices for its base Model Y, the most popular variant in China, unchanged. The global EV giant also offered a fresh insurance subsidy for Model 3 buyers in China worth $1,100, amid swirling rumors about the new upgraded Model 3.
The Model Y faces several new crossover rivals in China from BYD, Li Auto, XPeng and more.
Tesla has cut vehicle prices worldwide multiple times in 2023 and has also offered discounts, kicking off an EV price war and putting pressure on its own gross margins.
In the second quarter, Tesla reported total gross margins came in at 18.2%, down from 19.3% in Q1 and a decline of 682 basis points vs. last year. Auto gross margins, excluding regulatory credits and leases, came in at 18.1%, down from 18.3% in Q1.
That is below the 20% gross margin "floor" Tesla previously targeted. Ahead of earnings, a slew of analysts rang warning bells on gross margins.
CEO Elon Musk has signaled that he's willing to sacrifice profit margins now to boost sales, saying autonomous driving will generate massive profits down the road.
Futures Rise On China Stimulus Hopes, But Yields Keep Climbing
Tesla Stock Action
TSLA has been pulling back since second-quarter financials on July 19, as investor concerns over falling gross margins is outweighing the global EV giant's above-forecast earnings and revenue.
Tesla stock declined 4.4% to 242.65 last week. That move undercut support at the stock's 50-day, 10-week moving average, finishing Friday 6.7% below that technical level of support. Finishing the week more than 2% below the 10-week is a significant sell signal, according to IBD analysis.
Tesla has continued downward this week, dropping 4% ahead of Wednesday trade.
Cathie Wood Sells TSLA Stock
Cathie Wood's ARK Investment Management has sold a total of 119,030 shares over four consecutive sessions. On Tuesday, Wood sold $438,896 worth of Tesla stock, according to the company's daily trade disclosure.
Cathie Wood unloaded $2.15 million in TSLA on Monday. On Friday, the Cathie Wood firm sold $7.7 million in Tesla stock. ARK Invest kicked off its recent Tesla dump with more than 76,000 shares for about $18.75 million on Thursday.
Separately, David Tepper's Appaloosa Management disclosed in an SEC filing that it sold its Tesla stock stake in Q2. Appaloosa had started the Tesla position in Q1.
Tesla stock ranks fourth in IBD's automaker industry group. It has a 95 Composite Rating out of 99. Tesla has a 88 Relative Strength Rating and its EPS Rating is 94 out of 99.
Please follow Kit Norton on Twitter @KitNorton for more coverage.
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