Tesla raises starting price of Model Y in China after recent discounts

SHANGHAI – Tesla has increased the starting price of its Model Y crossover sport utility vehicle by 0.8 per cent to 261,900 yuan (S$51,150) in China, after the company’s aggressive price cuts at the beginning of the year ignited demand.

Tesla

raised the price of the rear-wheel-drive version

of the Model Y by 2,000 yuan from 259,900 yuan previously, according to price information listed on the company’s Chinese website on Friday.

The US automaker planned to step up output at its Shanghai plant over the next two months to meet demand stoked by aggressive price cuts on its best-selling models, Reuters reported previously.

Prices for other versions of the Model Y and the Model 3 cars are unchanged.

Tesla’s market share in China’s battery electric vehicle (EV) sector rose to 12.5 per cent in January 2023 from 9 per cent in December 2022, according to a Reuters calculation based on industry data.

In the United States, Tesla shares extended their breakneck rally on Thursday to double from the lows touched in early January, helped by a rising appetite for growth and technology stocks, and signs that demand for its EVs is rebounding.

The shares closed up 3 per cent at US$207.32 in New York, capping a 104 per cent gain from their Jan 6 intraday trough. The shares were bouncing off a 65 per cent plunge in 2022. 

Riskier growth stocks, which were beaten down hard last year amid concerns about rising interest rates and a recession, have made a strong comeback in 2023 as optimism about the economy has returned and investors bet that the Federal Reserve’s aggressive rate hike cycle is nearing its end.

At the same time, Tesla’s own earnings last month, and a spate of positive headlines on tax credits for EVs, have provided further lift to the shares of the company led by billionaire Elon Musk. 

“Tesla is rising so fast because of a market that believes the Fed is coming to the rescue,” said Mr Eric Schiffer, chief executive officer of Los Angeles-based private equity firm Patriarch Organisation. Good fourth-quarter results and “price cuts to turbocharge demand” also helped, he added.

Early in February, the Biden administration said it will expand the newly revamped EV tax credit to allow SUVs costing up to US$80,000 (S$106,250) to receive those credits. That move is a positive for Tesla, analysts said.

Separately, the company has seen a surge in demand for its cars after January’s big price cut, allowing it to institute a slight price hike. 

Still, Tesla’s gains of 68 per cent this year far outpace those of the Nasdaq 100 Index, which is up 13 per cent, as well as that of the NYSE FANG+ Index, which has advanced 28 per cent in 2023.

A frenzy of speculative trading in recent weeks that has seen retail traders rush into some of their favorite stocks can explain some of that exuberance, given Tesla’s popularity among individual shareholders. 

“Tesla has definitely been the main target of retail buying so far this year,” said Mr Marco Iachini, senior vice-president of research at Vanda Securities. While retail investors buying the stock is not unusual, given that Tesla is “an ultimate retail favourite”, Mr Iachini said the persistence and magnitude of the flows are surprising.

Given that Tesla’s sharp decline over the past year brought significant pain to mom-and-pop traders, the recent “hunger” for the stock could be due to a desire to chase it higher and make up for losses, Mr Iachini said.

Just this week, Tesla alone attracted a 33 per cent share of overall net purchases across all US securities, according to Vanda. 

The heavy retail flows into the stock are coming ahead of the company’s investor day on March 1, when Mr Musk is expected to unveil a third version of his “master plan”, Vanda analysts noted. 

Despite January’s gravity-defying rally, the EV maker’s shares are still down 49 per cent from the all-time high of US$409.97 touched in early November 2021. While some investors say that the worst could be over for Tesla, others advocate caution, especially with the risk of a recession still hovering and the EV industry’s brisk pace of growth expected to slow in the near term.

Meanwhile, scepticism about the company’s newest model, the Semi heavy-duty truck, is continuing to linger.

The stock is now trading just above the average analyst price target tracked by Bloomberg – suggesting that Wall Street does not see much more upside. Meanwhile, Tesla’s relative strength index, a technical gauge that measures whether a stock is under- or over-bought – shows signs of excessive buying, typically seen by markets as an indication that a decline is imminent.

Tesla shares can continue to rise until the end of the first quarter or early second quarter, when “signs of a potential hard landing may again slash valuation”, Patriarch’s Mr Schiffer said. REUTERS, BLOOMBERG