Tesla (NASDAQ:TSLA) stock is trending today on news that the electric vehicle (EV) maker is raising prices on its U.S. models.
The price hike announcement comes after Tesla CEO Elon Musk said publicly that he has a “super bad feeling” about the U.S. economy and announced plans to lay off 10% of the automaker’s salaried workforce. High inflation and rising interest rates to dampen it are hurting automotive sales, particularly for premium priced electric models.
On the same day that Tesla announced its price hikes, investment bank Jeffries Financial Group lowered its forecast for electric vehicles this year and next.
What Happened
Tesla announced that it is raising the prices for some of its electric vehicles by as much as $6,000. This is not the first time this year that the EV maker has increased its prices. Tesla previously lifted its prices twice in the same week of March.
The current price hikes, which take effect immediately, breakdown as follows:
- Model X: The Model X increases in price from $114,990 to $120,990. The Model X Plaid price remains the same at $138,990.
- Model S: The Model S price goes from $99,990 to $104,990. The Plaid edition’s price remains the same at $135,990.
- Model Y: Both versions of the automaker’s most popular Model Y vehicle increase in price. The Long Range goes from $62,990 to $65,990, while the Performance rises from $67,990 to $69,990.
- Model 3: The Model 3 price goes from $54,490 to $57,990.
During Tesla’s first-quarter report , Musk said he thought inflation was worse than expected and likely to last all of this year. He also warned that global supply constraints could hurt the company’s production.
Also today, Jeffries lowered its forecast for worldwide electric vehicle sales this year to 8.7 million from 9 million previously. Furthermore, it expects 11.5 million EV sales in 2023, down from an earlier estimate of 11.8 million. Jeffries cited the impact of inflation and higher interest rates as the reasons for its gloomier outlook.
Why It Matters
The price hikes from Tesla and Jeffries’ reduced forecast are further evidence that sales of electric vehicles are slowing due to high consumer prices and rising interest rates. These developments are also hurting investor sentiment and confidence in electric vehicle stocks. TSLA stock is down 4% today, bringing its year-to-date decline to 44%. The company’s share price is $669.50 at the time of writing, nearly half its 52-week high of $1,243.49.
The news of the price hike also comes just days after Tesla filed to split its stock on a 3-for-1 basis. The stock split, which shareholders will vote on at the company’s annual meeting on Aug. 4, will be the second time that the automaker has split its share price in two years. The company split its stock on a 5-for-1 basis in August 2020.
What’s Next
The news from Tesla continues to come fast and furious. Unfortunately, most of the news isn’t good for consumers or shareholders. Higher prices for its electric vehicles are likely to put them further out of reach for many consumers. But clearly Tesla sees the price hikes as necessary to boost its revenue as sales slow. Added in with the other recent news from Tesla and the broader EV sector, notably the Jeffries sales downgrade, and sentiment swirling around electric vehicles is worsening.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
