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Tesla Slashes Prices of 2 Models for China Post Tariff Cut

Tesla, Inc. TSLA reduced Model S and Model X car prices in China, per Reuters. The announcement was made after China reported that it will briefly suspend additional tariffs that it imposed on U.S.-manufactured cars and light trucks. The price of Model S was reduced by 105,000 yuan ($15,200) and Model X’s by up to 65,000 yuan.

Beginning Jan 1, 2019, China will slash the additional rate of 25%, which will reduce tariffs to 15%. The reduced rate will put U.S. exports at par with other countries within the World Trade Organization. The additional tariff suspension is followed by a trade truce between China and the United States, and will be effective on March 31.

In November, the company announced a similar price cut of its Model X and Model S cars in China to make the cars more affordable for its customers in China. During that time, it slashed the prices of the two models by 12-25%.

Tesla, Inc. Price and Consensus

 

Tesla, Inc. Price and Consensus | Tesla, Inc. Quote

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Steep tariff rates from July strained this U.S.-based electric automaker’s financials in 2018. During the announcement of third-quarter 2018 results, the company reported that high import duties on Model S and X vehicles declined its growth in China. In fact, CFRA analyst, Garrett Nelson, reported to CNBC that Tesla’s deliveries to China accounted for 6% in the third quarter’s total revenues compared with 17.2% in 2017.

Huge prospects for electric vehicles make China a worthwhile market for Tesla that offers alternate-energy cars. However, Tesla’s dependence on imports at times of high import taxes hampered growth. In a bid to increase affordability and reduce shipping costs, the company will start manufacturing vehicles in China by 2019.

In third-quarter 2018, Tesla’s revenues and earnings gained year over year and surpassed respective Zacks Consensus Estimate. For fourth-quarter 2018, it anticipates production and deliveries of Model 3 to increase sequentially. Additionally, the company expects to deliver 100,000 Model S and X vehicles in 2018.

Over the past seven days, the Zacks Consensus Estimate for Tesla’s earnings in the fourth quarter and 2018 has moved up 1.4% and 2.4%, respectively. Additionally, over the past month, the company’s stock has gained 3.5% outperforming 2.4% decrease recorded by the industry it belongs to.

 



Zacks Rank & Other Key Picks

Tesla currently sports a Zacks Rank #1 (Strong Buy). A few other top-ranked stocks in the auto space are Fox Factory Holding Corporation FOXF, Cooper Tire & Rubber Company CTB, and AutoZone, Inc. AZO. Fox Factory currently sports a Zacks Rank #1 while Cooper Tire and AutoZone carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Fox Factory has an expected long-term growth rate of 5%. Shares of the company have increased 40.1% over the past six months.

Cooper Tire has an expected long-term growth rate of 4%. Shares of the company have rallied 13.9% over the past six months.

AutoZone has an expected long-term growth rate of 12%. Over the past six months, shares of the company have gained 26.8%.

The Hottest Tech Mega-Trend of All

Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.

See Zacks' 3 Best Stocks to Play This Trend >>


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