Shares of Tesla (NASDAQ:TSLA) stock are down 3% so far today on news that the company is reducing the prices of its electric vehicles (EVs) sold in the U.S. and Europe. Specifically, the company is lowering these prices by as much as 20%.
These price cuts are being undertaken to help boost sales amid an economic downturn and as the Austin, Texas-based company faces growing competition in the EV space. Prior to today, the TSLA share price had declined about 65% over the last year to $123.56 per share.
Here’s what investors should know about Tesla moving forward.
What’s Happening With TSLA Stock?
Tesla is reducing prices on its top-selling Model 3 sedan and Model Y crossover SUV between 6% and 20% in the U.S. market, per Reuters. A basic Model Y electric vehicle will now cost $52,990, down from $65,990 previously. Tesla has also announced price cuts on its Model X luxury crossover SUV and Model S sedan in the U.S. market.
In Germany, Tesla is reducing prices by 1% to 17% on its Model 3 and Model Y vehicles as well. It is also lowering prices elsewhere in Europe, including in France, Austria and Switzerland.
All told, these reductions are the latest in a series of price cuts issued by Tesla. Discounts from the EV maker have been extended in other jurisdictions like China and Canada as well.
Why It Matters
Tesla CEO Elon Musk said recently that the prospect of a recession and higher interest rates have forced the company to lower prices to sustain volume growth. Tesla cut prices in China last week in a move that some analysts believe could lead to a price war in the word’s biggest market for EVs.
Other analysts have expressed concerns that the price cuts and discounts will hurt profits at Tesla moving forward. The company’s most recent delivery numbers missed expectations, sparking a steep selloff in TSLA stock. Shares have declined more than 25% over the past one month.
These latest price cuts are accelerating the selloff in TSLA stock as investors’ fears about slowing sales and lower profits grow worse. Until Tesla gets its pricing strategy in order and demonstrates that deliveries are back on track, the stock will likely be pressured. Those interested in buying shares may want to wait for signs of a bottom.
On the date of publication, Joel Baglole did not hold (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.
