Despite these problems TSLA maintained a stock rally
This is an interesting week for Tesla (NASDAQ: TSLA). Company CEO Elon Musk has launched a very public social media war with aides of Russian President Vladimir Putin. The company had to temporarily shut down production at its Shanghai factory due to the growing prevalence of COVID-19 in China.
Earlier in the week, it was reported that Tesla would raise the prices of its vehicles by up to 10% due to rising costs.
What is the market response to these developments? By the close of trading on Wednesday, TSLA stock had rallied nearly 9%.
With fines set until 2022, what is really going on with the stock? (Even after the rally this week, it was down 27% in 2022).
The answer is that the global events of the big films are making investors more optimistic. Fears of inflation and rising interest rates have generally hurt markets - and TSLA in particular - to start the year.
This week's events are helping the market rally, including the fall in oil prices and some signs of progress in the talks between Russia and Ukraine. However, this does not mean that the latest Tesla developments need to be scrutinized.
Impact of vehicle price hike on TSLA stock
Inflation and the war in Ukraine, threatening Russia's access to nickel production, put pressure on Tesla, causing prices to rise significantly. Last week, the company increased the price of the long-range versions of its Model 3 and Model Y by $ 1,000. This is nothing compared to what came this week. On Tuesday, Tesla reportedly raised prices by between 5% and 10% on each EV.
This is a huge price increase for a series of EVs starting at under $ 47,000 now.
TSLA stock was not affected after the news broke, but as I said, global events weigh heavily on what is happening. One thing that worries shareholders is that, after a series of concerns, price is a big reason why consumers do not buy Tesla vehicles. And traditional automakers are following Tesla with low-cost EV alternatives.
Why am I not particularly concerned about rising Tesla prices? First, all EV manufacturers will eventually have to pay for their vehicles to reflect the rising cost of batteries.
Second, the starting price of the Model 3 looks expensive until you realize that the average price of a new car in the U.S. has risen from $ 47,000 in January. It puts it at some angle.
Third, by taking the bullet and raising prices, Tesla is maintaining profit margins despite rapidly rising material costs.
Return of Covid-19 road blocks
In other news, Tesla also raised prices in China. The news that Tesla had to stop production at its Shanghai factory due to the spread of Covid-19 could be a ****** problem in that country. This is not a Tesla-specific issue. Many other production facilities in China were closed for days last week as the country struggled with the Kovid-19 revival.
The thing of concern here is that covid is not creating havoc. Factory closures and supply chain headaches have not yet fully receded. Similar conditions may continue until 2022.
The bottom line is on the TSLA stock
Earlier this week, I wrote about a growing list of concerns that could lead to a potential decline in TSLA stock. These include supply chain problems, the company's inability to launch new vehicles by 2022 due to a shortage of chips, and another cyber-truck war in Ukraine, which spends crucial commodities such as delays, nickel, inflation, rising interest rates and delays. Affects supply. Tesla's 4680 battery output increased.
There is also the problem of more EVs in the market (than competitors) due to increased demand and increased consumer acceptance. Discontinue Covid-related production in China and add a significant price increase to that list.
Despite a long list of potential problems, Tesla continues to use electric vehicles and the shortage of customers is not obvious. In the short term, the TSLA stock is likely to remain volatile. However, as the EV market continues to expand, the long-term picture looks bright for this portfolio grader "B" rated stock.
Finally, Tesla stock is worth considering whether you can handle the potential for some volatility in the short term. This is especially true as TSLA shares are now trading 32% lower than their November 2021 all-time highs.
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Courtesy Grizler.com
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