Electric vehicles are growing increasingly popular among purchasers, and Tesla is likely to be the first brand that comes to mind. While recent price drops may worry some investors, many believe they will help entice customers and demonstrate company’s competitive advantage.
Tesla’s price cutbacks may actually strengthen the company’s competitive edge, rather than eroding it. The news of price decreases for the Model 3 and Model Y originally resulted in a dramatic decline in the price of shares, raising fears among bearish investors. In addition to the United States and Europe, the company has reduced prices in China, South Korea, Japan, and Australia.
Tesla’s enhanced manufacturing capacity may be one of the reasons for this drop, which we believe will play a role in future growth. Even bulliesh investors and analysts believe the drop is in line with the automaker’s long-term plan.
Tesla claimed cost inflation as the primary reason for the price decrease, while it might possibly also be due to the newly adopted federal EV tax credit update.
Some Model 3 and Y vehicles were previously ineligible for the $7,500 federal EV tax credit because they were priced outside of the acceptable range. With the latest price reductions, several Model Y cars have become eligible. It’s impossible to predict what may happen to Tesla’s stock, but the news comes as increasing competition enters the still-niche EV market.
Reference- EVANNEX, The Motley Fool’s, Clean Technica, Business Insider, Tesla website