Tesla share price up 1% after lowering prices on Model S and X cars

The car company's stock is rising after slashing prices on its Model S and X vehicles.

Tesla logo after Tesla lowers prices on Model S and X cars Source: Bloomberg

Tesla share price has increased after cutting prices on its Model S and X cars. The car company’s stock is rising after a six-day slide.

Why did Tesla lower prices on the Models S and X?

While Tesla wouldn't say why it cut prices on the Models S and X, analysts believe it's because of stagnant sales of the high-priced vehicles. The Model S sedan’s price now starts at $71,250 after being cut by $3000. The Model X sports utility vehicle (SUV) starts at $71,950 after the price was reduced by $2000.

Tesla has struggled with shipping its Model 3 cars to Europe and had worse-than-expected Q1 earnings. Baird analyst, Ben Kallo, believes that it could be difficult for Tesla to recover from its recent challenges.

‘Demand concerns, credibility questions, and messaging/communication (including a recent email announcing 'hard core' cost cuts) have weighed on Tesla shares in recent weeks, and we think it could take several weeks/ months for the narrative to shift,’ said Kallo in an email.

Tesla downplayed the price reductions and said that changes in vehicle prices are common.

‘By any reasonable standard, these small changes are not newsworthy,’ said Tesla in a statement.

What’s next for Tesla?

Navigant Research analyst, Sam Abuelsamid, noted that Tesla has always been able to overcome problems with chief executive officer (CEO), Elon Musk, and his creative ideas to disrupt the automobile industry.

‘The business fundamentals of Tesla always have been shaky, but the stock price has been buoyed by the story that this is a company that was going to do huge things,' said Abuelsamid.

Despite Tesla's recent troubles, there is good news from the electric car company. Musk said in an email to customers that Tesla produced 900 Model 3 cars a day in the past week and is close to beating its record on deliveries in Q2. The news could be the start of a positive change for Tesla.


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