Tesla stock was poised to skid to new 30-month lows Friday after the company steepened its discounts on Model 3 and Model Y autos sold in China. The move sent U.S.-traded shares of China EV competitors sharply lower, alongside Tesla, in premarket trade.
The China price cuts, the company's second discount in the country in fewer than 10 weeks, focused growing attention on a weakening of consumer demand.; Consumers, facing high inflation, rising interest rates, financing costs and an increasingly uncertain economic outlook, have grown more cautious about big ticket purchases.
In October, after years of price increases, Tesla announced its first price mark down in China. Tesla began discounting Model 3 and Y autos in the U.S., offering $7,500 price breaks in December on vehicles delivered before the end of the year.
After Jan. 1, incentives related to the Inflation Reduction Act applied to certain Tesla vehicles.
On Friday, Tesla announced on Chinese social media it would pare prices on its two most popular models in China — both manufactured at its Shanghai facility.
Tesla's entry-level vehicle, a rear-wheel drive Model 3, sells for $47,000 in the U.S. Tesla on Friday cut the Model 3 price In China by 36,000 yuan, about $7,000. That put the sticker price at 229,000 yuan — about $32,700. The Model Y now starts at roughly $37,000.
Engineering innovations and cost controls enabled the discounts, the company said. Tesla also cut Model Y and Model 3 prices in Japan, South Korea and Australia, according to Nikkei Asia.
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Prior price cuts had so far failed to counter the trend toward increasingly cautious consumers. Tesla's deliveries of China made cars, including domestic sales and imports, fell to 55,800 in December, about half of November's sales pace, according to the China Passenger Car Association.
In the prior week, Tesla announced deliveries of 405,278 for the fourth quarter. That was up 31% year over year, but below analyst expectations for 420,000 units. For the year, Tesla deliveries jumped 40%, 10 more than 1.3 million vehicles, below its own target for a 50% increase.
Brokerage Edward Jones upgraded Tesla stock to buy, from hold, on Thursday. Also on Thursday, Mizuho maintained its buy rating, while modestly trimming its price target on Tesla stock to 250, from 285.
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Tesla's price moves show rising competition, especially from China's BYD, in China, Australia and, at the end of January, Japan. On Jan. 5, BYD launched its Yangwang premium brand and unveiled its first two models, both starting at 1 million yen, or $145,000.
But Inflation Reduction Act benefits point to a tail wind in the U.S., the company's Semi-truck sales appear to be ramping, and production of the Cybertruck pick is likely for a mid-2023 production start. Tesla stock dropped more than 60% in 2022, and is down another 10% in January. Mizuho's lowered price target is 127% above where the stock closed on Thursday.
Among China-based EV makers, Li Auto tumbled 9% in premarket trade. Nio shed 7%. Xpeng collapsed almost 13%, while BYD remained inactive in early trade.
