Tesla Down 3% Premarket After US Price Cut Announced

Tesla’s stock is in the red in the market pre-open on Monday, likely due to sweeping US price cuts announced by the electric vehicle (EV) maker on Friday. Meanwhile, the company said it would build a Megapack battery factory in Shanghai, but the announcement failed to neutralize the share drop.

Tesla Announces Price Cuts for Fifth Time Since January

Tesla’s shares are down more than 3% in premarket trading Monday as the markets reacted to the carmaker’s announcement of fresh price cuts on all EVs in the US on Friday. The move marks the fifth price reduction in the US since January.

According to its website, Tesla slashed prices between 2% and almost 6% in the US as the company looks to boost demand amid rising interest rates. On the other hand, analysts said Tesla’s aggressive discount drive on its EVs could increase its profitability.

Tesla slashed prices on both versions of its Model 3 sedan by $1,000 and Model Y crossover vehicle by $2,000. The company’s luxurious Model S and Model X vehicles, which have seen a slowdown in sales recently, saw their price reduced by $5,000 each.

Tesla’s price cuts also come as the US prepares to impose stricter standards this month to limit EV tax credits. According to Tesla, the more stringent standards would reduce the $7,500 tax credit available for the base version of its rear-wheel drive Model 3.

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Tesla to Open Megapack Battery Plant in Shanghai

On Sunday, Tesla announced plans to build a Megapack battery factory in Shanghai as the automaker doubles down on its investments in China, its second-largest market. The new plant will enable Tesla to produce 10,000 Megapacks – large-sized batteries that can store vast amounts of electricity. The announcement failed to offset the price cuts’ damaging impact on Tesla’s shares in the premarket.

“Tesla opening Megapack factory in Shanghai to supplement the output of Megapack factory in California.”

– Tesla CEO Elon Musk wrote on Twitter.

Tesla opened its car plant in Shanghai in 2019, its first factory outside the US. The plant, which currently produces 22,000 vehicles per week, saw a production cut last year amid lockdown restrictions in China due to Covid-19.

Will Tesla’s plan to boost demand through price cuts work out? Let us know in the comments below.