Tesla shares take a hit on price cuts in China

[MongiIG]

In an effort to stay competitive in China, electric car maker Tesla has had to drop the price of some models by up to 9% in the Chinese republic. Analysts in the sector say this could now bring about a price war.

 Jeremy Naylor | Writer, London | Publication date: Monday 24 October 2022

Tesla share price down

Tesla has opened all-sessions on the IG platform with a loss of 3% in its share price after a warning that it looks like it's going to be entering a period of hard price pressure coming through from discounts that are going to be seen at the retail end of the market.

Share price chart

Let's take a look at the share price chart because in the longer term, you can see that where Tesla’s line of support at 20,420. In today's session, we're having another attempt to get below that. But if we do succeed in getting a candle close below there, we’re then on the way down to levels not seen since June 2021 and then the next line to watch out for is this low that we had here back on the 19th of May at $181.50.

So at 207, which is where we are at the moment, we've got almost 20 more than $20 distance before we get to the next line of serious support.

Price cuts

Now, Tesla has started cutting prices for its Model 3 and Model Y cars by as much as 9% in China. The price cuts posting listings on the Chinese website of Tesla are the first by Tesla in China in 2022 and come after Tesla began offering limited incentives to buy to buyers who opted for testers insurance last month.

Analysts are warning of a price war in the sector. Now, if this does happen, you can expect to see further profit erosion of the company. And we may even see this line at 18,150 broken. If you're short on this, your stock goes above recent price action at around about the $230 level.

At the moment at least, price pressures in Tesla pricing for retailers are coming through in a share price chart, which is showing a drop of 3% early doors on the trading day today.