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How Price Hikes and New Covid-19 Problems Impact Tesla Stock - Dailyforextrading

assetsfx.com

How Price Hikes and New Covid-19 Problems Impact Tesla Stock - Dailyforextrading

This has been an interesting week for Tesla (NASDAQ: TSLA). The company’s CEO Elon Musk started a very public social media battle with allies of Russian President Vladimir Putin. A surging Covid-19 outbreak in China has forced the company to temporarily halt production at its Shanghai factory.


All of this comes on top of news early in the week that Tesla would be hiking the prices of its vehicles by as much as 10% due to rising costs. How has the market reacted to these developments? As of Wednesday’s close, TSLA stock has put together a near 9% rally.

So what’s really going on with the stock now, given that it has been punished through 2022? (Even after this week’s rally, it's still down 27% in 2022).

Fauci says coronavirus infections might be plateauing The answer is likely that big picture world events are making investors more optimistic. Fears about inflation and rising interest rates hurt the market in general — and TSLA specifically — to start the year.

Developments this week including slipping oil prices and signs of some progress in talks between Russia and Ukraine are helping to buoy the market. However, that doesn’t mean the latest Tesla developments don’t deserve closer scrutiny.

Inflation and the war in Ukraine that threatens access to Russia’s nickel production have put pressure on Tesla, resulting in significant price increases.

Last week, the company hiked the price of long-range versions of its Model 3 and Model Y by $1,000. That was nothing compared to what came this week. On Tuesday, it was reported that Tesla has hiked prices on every EV it sells by between 5% and 10%.

There was no hit to TSLA stock after the news broke, but as I said, global events are probably overshadowing what’s going on.

The concern for shareholders will be that after range anxiety, the cost is the big reason why consumers aren’t buying Tesla vehicles en masse. And traditional automakers have been coming after Tesla with lower-cost EV options.

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The reasons why I’m not particularly alarmed about Tesla’s raising prices? First, all EV makers are eventually going to have to price their vehicles to reflect the rising cost of batteries.

Second, the starting price for a Model 3 sounds expensive until you realize that the average price for a new car in the U.S. topped $47,000 in January. That puts it in some perspective. Third, by taking the bullet and raising prices, Tesla is preserving profit margins despite rapidly rising material costs.

In other news, Tesla also raised prices in China. The bigger issue in that country could be the news that Tesla had to shut production at its Shanghai factory because of a Covid-19 outbreak. This isn’t a Tesla-specific issue. Many other production facilities in China have been shutting down over the past week as the country fights a Covid-19 resurgence.

The bigger concern here is that Covid isn’t done wreaking havoc. Factory closures and supply chain headaches are not fully behind us yet. Similar situations could continue to play out through 2022.

Earlier this week, I wrote about a growing list of concerns that could have a potential downside for TSLA stock. These included supply chain issues, a shortage of chips that resulted in the company skipping any new vehicle launches for 2022

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Another Cybertruck delay, the war in Ukraine that is impacting the supply of critical materials like nickel, inflation, rising interest rates, and delays in Tesla’s 4680 battery production ramp-up. Source: Nasdaq;

 

 

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