Tesla Sneaks In A Model Y Price Hike After Multi Billion Dollar Wipeout

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After a major announcement by a BP subsidiary earmarked $100 million for its electric vehicle chargers in America, Tesla has sneakily increased the Model Y Long Range price tag. The Model Y is an SUV designed mainly for family use, and it is available in five and seven seat variants. Before today’s price increase, the Long Range variant of the Model Y offered in the U.S. had a price tag of $48,490 for the basic five seat variant without the Enhanced Autopilot or Full Self Driving add on features, and the latest details on Tesla’s U.S. website have increased the price for this variant to $48,990.

Tesla Increases Model Y Price As Debate Starts About Slow Electric Vehicle Demand

The silent Model Y price increase that has become somewhat of a characteristic on a Thursday night follows a poor earnings show from Tesla. The firm reported its earnings for the third quarter earlier this month, and the results saw it post earnings per share of 66 cents. This marked a two year low and also missed analyst estimates. Tesla’s third quarter results followed an earlier delivery report that also missed analyst estimates, and the shares have lost 14% over the past month to wipe off billions in market value.

The earnings release was followed by a relatively sober earnings call conference that saw Tesla chief Elon Musk finally admit that tough macroeconomic conditions will also impact his car company. Musk also sounded cautious about the potential demand for electric vehicles, sharing that high interest rates contributed to higher mortgage payments and credit card debt, with people likely to “hesitate to buy a new car if there’s uncertainty in the economy.”

A screen grab of Tesla’s website shows the new Model Y Long Range price.

The quarterly earnings were also noticeable because of Tesla’s gross margin, which has dropped as the firm has been reducing prices to stimulate demand. A firm’s gross margin is the percentage of money it earns on its revenue after accounting for direct production and material costs, and higher prices naturally lead to beefier margins. Tesla’s third quarter earnings report was met by more than a dozen analysts cutting their share price targets.

Data compiled by Yahoo Finance shows that a 37 analyst average share price target for Tesla is $215.52, for a small $10 premium over the current share price. Analyst sentiment remained unchanged to some extent after the earnings, with Guggenheim, Citigroup, Wedbush, Morgan Stanley and Wells Fargo maintaining their Sell, Neutral, Neutral, Overweight and Equal Weight ratings for the stock after the earnings report.

Musk was also worried about the credit situation after the recent historic interest rate hikes, as he described credit card interest rates above 20% as “usurious” and “extremely punishing.” The resulting sell off in Tesla shares wiped off more than $130 billion in market value, enough to fund SpaceX’s operations for quite some time.

He described Tesla’s cost reduction efforts as a “Game of Thrones,” stating during the earnings call:

It’s like Game of Thrones for pennies. I mean, as a first approximation, if you’ve got a $40,000 car and roughly 10,000 items in that car, that means each thing, on average, costs four bucks. So, in order to get the cost down, say, by 10%, you have to get 40 cents out of each part, on average. It is a game of pennies … It does feel like digging a tunnel with a spoon at times.

Tesla’s woes are not unique, as other car firms face difficulties in the electric vehicle industry. General Electric and Ford, two of Tesla’s biggest rivals in America, are either delaying production or cutting work shifts, while others are struggling with lower production as managers struggle to balance waning demand with high production volumes.

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