Tesla Stock Price Plummets as its Car Prices Go Up

Summary:

Tesla stock price plummeted by 8 percent in yesterday's trading session, continuing a long-term bearish trend.

Yesterday saw Tesla’s stock price tumble by more than 8 per cent. The drop comes amidst a stock market downturn that has seen the S&P 500 stock prices slide into a bear market, after a 20 per cent year-to-date decline.

Why is Tesla’s stock price dropping?

Yesterday’s 7 per cent drop may have been as a result of the latest company’s announcement that they would increase the prices of their cars. Tesla noted that the rising cost of raw materials and problems with getting auto parts had contributed to the company’s decision to increase the prices of its cars.

According to reports, Tesla’s popular Model Y will see a 4.8 per cent price increase to $65,900 for the long-range version. Other vehicles, such as the Model 3 Long Range Price, will see a 6.4 per cent increase to $57,990. Below are some of the other price changes Tesla has made:

Model X Dual Motor All-Wheel Drive Long Range to increase by 5.2 per cent to $120,990.
The price of the Model Y Performance will rise by 2.9 per cent to $69,990.
The price of the Model S Dual Motor All-Wheel Drive Long Range will rise by 5 per cent to $104,990.
The Model S and the Model X plaid versions’ prices would remain the same.

Tesla Stock Price Analysis

Yesterday’s Tesla stock price drop of 8 per cent may have been contributed to by the company announcing price increases. However, the stock has been going down throughout the year. This is because other factors such as inflation, Fed rates, and a struggling US stock market have also played a part.

Looking at the chart below, we can see Tesla’s prices have been increasingly bearish for months. The year-to-date data also shows the prices have dropped by 46 per cent. Widening the scope of the Tesla stock analysis, the current price drop has also been contributed to by factors far beyond Tesla’s control.

Therefore, unless factors such as the rising cost of raw materials and problems with getting auto parts are addressed, there is a high likelihood of the bearish trend continuing. I expect Tesla to trade below $600 for the first time since June 16, 2021.

My bearish trend analysis will only be invalidated if the market conditions improve. This will mean Tesla being able to operate efficiently with problems such as getting raw materials at a good price and spare parts being readily available sorted.