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Tesla shares tank after US discounts double on key models

Dec 22 (Reuters) – Shares in Tesla Inc ( TSLA.O ) fell on Thursday after the luxury electric carmaker began offering discounts of $7,500 on Model 3 and Model I vehicles delivered in the United States this month, which fueled concerns that the company faces a reduction in demand as the economy slows.

On Dec. 1, Tesla began offering a $3,750 “credit” for Model 3 and Model I vehicles delivered before the end of the year. He increased the loan to $7,500 on Wednesday. It also recently started offering free charging for 10,000 miles (16,093 km) on vehicles delivered in December.

The rare discounts follow a string of price hikes by Tesla in recent years, which it has blamed on supply chain disruption and inflation.

Tesla shares ended down 8.9%, marking their worst month on record as concerns grow over softening demand for electric cars and CEO Elon Musk’s distraction from Twitter, which he bought in October.

Tesla underperformed the broader market, which fell as data showing a resilient economy fueled concerns about the Federal Reserve’s path to raising interest rates.

On Thursday, Musk said he predicted the economy would be in a “severe recession” in 2023 and that demand for high-priced items would be lower.

A Tesla Model 3 is seen at a showroom in Los Angeles, California, U.S. January 12, 2018. REUTERS/Lucy Nicholson

Analysts have cut their estimates for Tesla’s vehicle deliveries for the current quarter, reflecting slowing growth in key markets such as the United States and China.

“The fact that they appear to be lowering the price to increase shipping volume does not inspire confidence, especially at a time when we are seeing more and more competition,” said Craig Irwin, senior analyst at ROTH Capital Partners.

As the U.S. government plans to introduce tax breaks to boost demand for electric vehicles starting in January, Tesla buyers have delayed purchases until the incentives take effect, depending on demand.

The latest discount comes just days after the U.S. Treasury Department delayed limits on electric vehicle incentives until March, meaning Tesla and other U.S.-made electric vehicles will likely qualify for the full $7,500 in incentives from at least January through March.

Tesla is also offering a $5,000 credit in Canada for Model 3 and Model I vehicles delivered before the end of the year. The automaker also gave a 6,000 yuan ($860) discount on some models in China until the end of 2022.

Tesla said in October it would miss its vehicle delivery target this year, but downplayed concerns about demand after its revenue missed Wall Street estimates.

(1 dollar = 6.9761 yuan)

Reporting by Hiunjoo Jin in San Francisco, Jaiveer Singh Shekhavat, Maria Ponnezhath and Nivedita Balu in Bengaluru; Editing: Tom Hogue, Emelia Sithole-Matarise, Shounak Dasgupta and Leslie Adler

Our Standards: Thomson Reuters Trust Principles.

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