This December was a tough one for the US stock market. The Dow fell by 653.17 points, or around 2.91 percent. Many companies experienced a fall in their shares, but this drop was particularly painful for Tesla. Tesla’s shares fell by 24.38 points, or 7.62 percent.
This drop in shares occurred after Tesla cut its Model 3 prices in China and as CEO Elon Musk announced the company would repay customers in the US in case they missed their tax credit deadlines due to the delay in shipment of their Model 3.
Tesla has been reducing the prices to its Model 3 in China since November. As per Reuters, Tesla has cut the prices of its electric car in China, reducing it to 499,000 yuan which is $72,000. The company started off with its Model X and Model S cars, reducing their prices by 12-13 percent this November. The company said that it was “absorbing a significant part of the tariff to help make cars more affordable for customers in China.”
Also, Tesla cut prices on its Model S and X when the Chinese Finance Ministry announced it would suspend tariffs on US-made vehicles and auto parts and would continue this practice for three months, from January onwards. This would lower the cost that is incurred when importing the US-made electric cars to China. This announcement came soon after both the leading countries of the world agreed to a cooperate on the tariff war. China’s Ministry of Finance showed an inclination towards reducing the tariffs so that both countries would prosper from the deal. The Ministry announced it would roll back tariffs to what they were before the trade war began.
President Trump also welcomed the initiative and said in a tweet:
“China just announced that their economy is growing much slower than anticipated because of our Trade War with them. They have just suspended U.S. Tariff Hikes. U.S. is doing very well. China wants to make a big and very comprehensive deal. It could happen, and rather soon!”
The director of China’s Automobile Dealers Association’s import committee, Wang Chu, said after the announcement:
“This is a good signal that China and the United States are on track to solve the trade war. Car makers might be ordering a large number of imported cars now.”
Regarding Tesla compensating its US customers on delayed shipment of their order, Tesla announced in October that if a customer from the US ordered any of its electric Model S cars (the Model X or Model 3) before October 15, they would get the full federal tax credit of $7500.
When asked what would happen if the orders from pre-December aren’t delivered before the New Year, Tesla promised to reimburse the missed-out-on tax credits.
If Tesla committed delivery & customer made good faith efforts to receive before year end, Tesla will cover the tax credit difference
— Elon Musk (@elonmusk) December 22, 2018
The year didn’t start off smoothly, but in the third quarter of the year, Tesla delivered 83,5000 vehicles, which included 55,840 Model 3 units.
Let’s see where the stock market heads next. Stay tuned to learn more!