Tesla (TSLA) trades down following price cuts in China

Shares of Tesla (NASDAQ: TSLA) are down more than 3% in pre-market trading Friday morning after the electric automaker officially reduced the price of their Model 3 and Model Y in China, with cuts ranging from Rmb6.5k to Rmb15.5k.

According to channel checks conducted by Morgan Stanley, the reduction was more moderate than what the market had anticipated. The revised MSRP for the entry-level Model 3 and Model Y now stands at Rmb245.9k and Rmb258.9k, respectively.

As a response to recent price cuts by both Li Auto (NASDAQ: LI) and Tesla, analysts at Morgan Stanley predict that investors will be closely monitoring for additional reactive price adjustments from local competitors. The market is expected to react negatively to these price reductions, particularly affecting mass-market peers such as BYD and XPeng (NYSE: XPEV).

Major OEMs may engage in price competition to secure more orders, especially considering their low order backlogs amid the year-end sales push, except for those with new launches like Aito and XPeng.

Tesla also revealed it will temporarily halt most production at its Model Y plant near Berlin from January 29 to February 11. This suspension is attributed to a response from suppliers adjusting transport routes due to attacks on vessels in the Red Sea.

Morgan Stanley anticipates a prioritization of destocking over new launches in March/April, with no relief expected in price competition until the Lunar New Year in February.

Shares of TSLA are down 3% in pre-market trading Friday morning.

By Michael Elkins | [email protected]

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