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In the midst of a down market, shares of EV leader Tesla (TSLA -1.53%) tumbled more than most, falling 7.2% through noon ET on Thursday after Reuters reported that Tesla is once again raising prices on its electric cars.
Citing the rising cost of raw materials and continuing problems getting auto parts with which to build its cars efficiently, Reuters noted that Tesla has raised the price on its popular Model Y crossover by about 4.8%, to $65,990 for the “long-range” version.
Tesla isn’t stopping there, though. Digging into the details on Tesla’s website, Electrek reported last night that the prices are as follows:
Skimming the changes, there’s no discernible pattern to where Tesla is hiking prices more and where less. While “Plaid” pricing is already the highest for both the S and X and is not budging, Tesla’s other Model X doesn’t cost much less, yet its price was hiked significantly.
The biggest change in pricing came to the Model 3, and raising the price on Tesla’s entry-level EV may be a move to encourage customers to skip past the Model 3 and pay just a little more to get an even better, bigger car instead. Similarly, the price changes in the Model Y tighten the price differential between the lower-end and higher-end models — which might likewise be aimed at persuading shoppers to buy a little more car than they had intended.
To that extent, therefore, it almost seems as if raising prices might be good news for Tesla, and that investors who are selling the stock on today’s news are making a mistake — but for one thing.
Just two days ago, Elon Musk was quoted telling his audience at the Tesla Silicon Valley Owners Club that he thought electric rival Rivian (RIVN -1.36%) made a mistake when it tried to raise prices on its electric trucks and SUVs back in March. When you raise prices, commented Musk, you “reduce the number of people who can afford the vehicles exponentially,” as Electrek reported.
If that’s true for Rivian, though, then shouldn’t it also be true for Tesla? By raising his own prices, doesn’t Musk run the risk of depressing demand for new Teslas — at the very moment when rivals such as Hyundai and Ford and GM — and yes, Rivian, too — are bringing new and occasionally cheaper alternative EV models to market?
Because if that’s the case, then it might be a good reason Tesla stock is going down today.
Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.
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