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Tesla (TSLA) stock is down in the pre-market. Meanwhile, the company announced that it has slashed the price for its Model 3, Model S, Model X in North America and also reduced the price for its Model S and Model X in China to gain some competitive advantage.
California based Electric vehicle maker Tesla Inc (NASDAQ: TSLA) on Tuesday announced the reduction of the prices for its new cars both in North America and China’s market. It was a speedy reaction move by the company after several market factors led to the decline in its vehicle sale.
TSLA stock closed yesterday at $820.23 after adding a dollar and 32 cents, approximately 0.17%. However, in the pre-market, the shares are down 1.49% to trade around $808.00 and down nearly 1% in the past five days. Now in the pre-market, Tesla (TSLA) stock is 0.94% down, at $812.50.
According to the company, all its new Model 3, Model S and Model X will be reduced by as much as 6% in the North American market. On the other hand, the Chinese Tesla EV customers will purchase the Model S and Model X at 4% lower than the previous price.
Model 3 sedan and Model Y crossover SUVs are much cheaper in comparison to the Model S sedan and also Model X sport utility vehicles. In a bid to bring down the cost of its vehicles, Tesla has been developing cheaper and more efficient batteries with capabilities withstanding a million mile.
Tesla Cars Price Cut Is Feasible in Current Market Situation
As the coronavirus continue spreading around us, one of the most hit industry has been the car industry, where the market demand has drastically fallen. The effect might continue post-COVID-19 as the high-income earners find comfort in remote working.
Furthermore, Tesla EV market price and its logistics remain higher to run than traditional fuel-run engines. However, with the push on clean emission engines in most parts of the world, Tesla being a leader in that sector is expected to benefit in the coming years.
According to recent research by HIS Markit, global vehicle sales are predicted to fall by 22% by the end of this year. This is highly explained by the sharp decline in vehicle demand caused by the coronavirus crisis.
Cutting the price for its cars, Tesla will attract more customers who probably would not have bought the cars. “This is a smart strategic move in our opinion given the current macro and COVID-19 environment consumers are facing,” Wedbush Securities analyst Dan Ives told CNBC.
“Cutting prices to further stimulate demand in the US is feasible in the near term, as the current cost structure and higher FSD pricing gives Tesla more flexibility to make these price cuts,” Ives added in his letter.
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