Tesla Stock Drops 5% Following Price Reduction and Model 3 Update.
Tesla, the electric car company, experienced a 5% drop in its stock price on Friday following several significant developments. The company decided to cut costs on specific models in the United States and lowered the price of its premium driver assistance software.
The stock closed at $245.01, maintaining an impressive year-to-date increase of almost 100% despite the recent 2.7% weekly gain.
One of the notable changes made by Tesla was the reduction in the price of its premium driver assistance software, known as Full Self-Driving (FSD). While CEO Elon Musk had previously stated that the cost of FSD would only increase, the company slashed it by $3,000, bringing it down from $15,000 for customers who choose to purchase it upfront rather than subscribing monthly, with subscription rates ranging from $99 to $199 depending on the version.
Tesla also implemented price cuts on inventory vehicles in the United States, spanning its entry-level Model 3 sedan, the luxury Model S sedan, and the Model X SUV. In China, Tesla reduced the Model S and Model X prices by approximately 7%.
The decision to reduce FSD prices amidst ongoing investigations by the National Highway Traffic Safety Administration (NHTSA) into potential safety defects related to Tesla’s driver assistance systems.
These investigations were initiated following a series of accidents in which Tesla drivers were believed to be using driver assistance features when their vehicles collided with stationary first responder vehicles.
Interestingly, the price reductions for some Model X vehicles in the United States made the SUV eligible for a $7,500 tax incentive for qualified buyers. However, this move upset some previous Tesla customers in the United States and China. They expressed concerns on social media about the reduced resale value of their cars and the higher insurance costs they now face due to the decreased initial purchase price.
Simultaneously, Tesla introduced a Model 3 refresh, including controversial changes like a “stalkless” turn signal. In the redesigned Model 3 for China and the EU, drivers must interact with a button on the steering wheel to indicate lane changes or turns.
The traditional left-side stalk has been replaced with touchscreen controls for the park, reverse, neutral, and drive functions. Notably, the base Model 3 refresh in China has an approximately 12% higher price tag than its predecessor.
The Model 3 refresh, often called the “highland,” also features an extended-range battery option. Tesla’s Chinese website claims that the high-end version of the Model 3 refresh can travel up to 713 kilometers (443 miles) on a single charge, while the base model offers a range of 606 kilometers (377 miles).
The new Model 3 variant also incorporates various design changes, including a touchscreen that allows rear passengers to adjust comfort settings and entertainment options, exterior design tweaks, and new color options.
Despite the increased pricing, analysts at Bank of America believe that the impact of the new Model 3 debut on Chinese electric vehicle (EV) competitors should be manageable, given that the sedan’s entry price exceeds consumer expectations. Notable Chinese EV competitors include XPeng’s P7, BYD’s Han and Seal models, and Leapmotor’s C01 electric cars.
However, due to the higher starting price of the Model 3 refresh in China, initial sales volume may not reach the previously expected levels, according to analysts. Nonetheless, they maintain a positive outlook for the vehicle’s sales in the current quarter, as consumers eagerly await the upgrade.
In addition to these developments, Tesla faced reports of new federal investigations by the U.S. Securities and Exchange Commission (SEC) and a Manhattan federal prosecutor. These investigations center around allegations of deliberate misinformation to consumers regarding the range of Tesla’s EV batteries and improper use of resources to benefit CEO Elon Musk personally.
Regarding the allegations of resource misuse, Elon Musk denied on Friday, refuting reports that Tesla had plans to construct a “glass house” near Austin, Texas.
In summary, Tesla’s recent stock price decline, price reductions on specific models and FSD software, and the introduction of the Model 3 refresh with various changes mark significant events for the company.
Coupled with ongoing investigations and allegations, these developments underscore the dynamic and challenging landscape in which Tesla operates in the electric vehicle industry.
