Tesla cut prices in China for the second time in less than a week. With recent cuts, Elon Musk’s electric-vehicle company is simply following the crowd. A price war is brewing in China. That prospect has investors nervous. The stock is down.
Tesla
(ticker: TSLA) has reduced the price of its Model S luxury sedan in China to 754,900 yuan, or $103,463, from 808,900 yuan, according to its official Weibo account. It also cut the price of its Model X SUV to 836,900 yuan, or $114,702, from 898,900 yuan.
The move extends price cuts across Tesla’s range in China after it implemented insurance subsidies and price reductions for its lower-end Model 3 and Model Y vehicles over the weekend.
“Price war started again,” wrote Citi automotive analyst Jeff Chung in a Sunday report. He counts cuts on 23 models from nine automakers in August. That was before Tesla cut prices. “Price war, [profit] margin and cash-flow concerns likely will be more of a swing factor entering into early 2024.”
Chung doesn’t cover Tesla stock, but his thoughts about profit margins apply. Tesla reported a first-half operating-profit margin of about 10.5%, down from 17% in the first half of 2022. Price cuts around the globe are mostly responsible for the decline.
Tesla started things off by lowering prices aggressively around the globe at the start of 2023. It hasn’t stoped adjusting prices. On Tuesday, Tesla launched cheaper versions of the Model S and Model X for order on its website in the U.S., at price points $10,000 below the standard versions but with limited range.
Tesla stock is down 1.6% in premarket trading on Wednesday, having slipped 2.8% on Tuesday.
S&P 500
and
Nasdaq Composite
futures were flat.
Price cuts are weighing on other EV stocks. U.S.-listed American depositary receipts, or ADRs, of Chinese EV makers are down, too.
NIO
(NIO) is 3.7% lower,
XPeng
(XPEV) down by 2.6%, and
Li Auto
(LI) 1.9% lower. Chinese EV leader
BYD
(1211. Hong Kong) stock is off 2.2% in overseas trading.
Consumers might like a price war. Investors don’t.
Write to Adam Clark at [email protected]
Read the full article here
