Tesla (TSLA) caused a stir in the automotive industry on Friday by introducing its enhanced Model 3 in China and slashing prices by nearly 20% on its premium vehicles, the Model S and Model X, in the U.S. TSLA shares plummeted on Friday.
On the same day, Tesla discontinued its standard range Model S and Model X variants in the U.S. and reduced the price of the Model X all-wheel drive version to under $80,000. This adjustment now qualifies the Model X for the federal $7,500 tax credit under the Inflation Reduction Act (IRA).
Tesla's stock dropped 5% to 244.97 on Friday during market trading. On Thursday, TSLA had risen 0.5% to 258.08.
Tesla trimmed its price on the Model S long range version to $74,990, a decrease from the previous $88,490. The company also reduced the price on the Model S Plaid trim package by 17% to $89,990. Additionally, the Model X long range version now costs $79,990, down from $98,490.
Tesla's Model X webpage now features a banner announcing its eligibility for the $7,500 tax credit. This would lower the price of an all-wheel drive Model X to $72,490 before any local or state incentives.
As of Friday morning, the Internal Revenue Service (IRS) has not yet verified the change on its website. The IRS currently states that all Model 3 and Model Y vehicles are eligible for the $7,500 tax credit.
Tesla has also discontinued its shorter-range versions of its Model S and Model X vehicles. On Aug. 14, the company introduced new base versions of the vehicles, cutting the U.S. price tag on its base luxury electric vehicles by $10,000.
Tesla also lowered the price of its Full-Self Driving (FSD) option in the U.S. to $12,000, down from $15,000. This means that customers who purchase a new Tesla vehicle can now add the FSD option for $12,000 instead of the previous $15,000.
The U.S. price reductions on the Model S and Model X coincide with Tesla's unveiling of its upgraded Model 3 vehicle in China on Friday. The global EV leader also appears to be nearing the launch of its eagerly awaited Cybertruck.
Before Friday's decline, Tesla stock had risen 1.2% to close Thursday at 258.08. This left shares at their 50-day moving average. A move above Thursday's high of 261.18 could provide an early entry point for aggressive investors.
According to MarketSmith, Tesla has established a new base with a proper buy point at 299.29.
Tesla stock finished the week up 2.7%. Shares initially retreated after the automaker announced its second-quarter financial results on July 19. Investor worries over declining gross margins overshadowed the global EV leader's better-than-expected earnings and revenue. News of sales from Cathie Wood's ARK Invest ETFs may also have contributed to some downward momentum.
Tesla stock is ranked fourth in IBD's automaker industry group. It has a 97 Composite Rating out of 99. Tesla stock has an 88 Relative Strength Rating and its EPS Rating is 93 out of 99.
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