Tesla stock sinks, then rallies, after company cuts prices in China

Tesla (TSLA) stock fell Friday after the company cut the price on two of its models in China, the automaker’s second cut in three months as it battles waning demand in the country.

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Tesla cut prices on its China Model 3 by 13.5%, which now starts at $33,515, and its Model Y by 10%, which now starts at $37,899, according to calculations from Reuters

Shares of the company fell more than seven percent Friday following the news, setting a new 52-week low for the automaker. The stock rebounded midday, turning positive in afternoon trading.

Tesla stock has now fallen more than 40% over the last month and remains at its lowest level since August 2020.

Future Fund managing partner Gary Black noted on Twitter early Friday some Wall Street analysts had already been expecting some price cuts, but said this move will still lead to “another round of 2023-2026 earnings cuts.”

Black noted the price cuts are needed to help prevent further market share loss for Tesla in China where BYD recently bested Tesla in 2022 year-end deliveries.

“Tesla’s price cuts intensify the need for Tesla to accelerate development of a $25K-$30K TSLA compact as a long-term China solution to combat BYD’s huge success in China’s under ¥200K segment,” Black wrote on Twitter. “The price cuts will act as a band aid until a $25K-$30K compact is ready.”

Tesla’s price cuts come just days after the company announced weaker-than-expected vehicle deliveries for the fourth quarter, despite increasing deliveries in 2022 by 40% from the year prior. 

Tesla delivered 405,278 vehicles in Q4, falling short of Wall Street estimates by about 15,000, and produced 34,000 more cars than it delivered during the quarter. 

“Tesla has built a fair amount of inventory here over the last six to nine months,” CFRA Research Senior Equity Analyst Garrett Nelson recently told Yahoo Finance Live. “And they really need to bring the supply and demand back into balance.”

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A man holding a computer walks past a sign of electric carmaker Tesla during a media day for the Auto Shanghai show in Shanghai, China April 20, 2021. REUTERS/Aly Song

Josh is a reporter and producer for Yahoo Finance.

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