Tesla Slashes Prices Of 2 Models For China Post Tariff Cut

Tesla, Inc. (NASDAQ:TSLA) reduced Model S and Model X car prices in China, per Reuters. The announcement was made after China reported that it will briefly suspend additional tariffs that it imposed on U.S.-manufactured cars and light trucks. The price of Model S was reduced by 105,000 yuan ($15,200) and Model X’s by up to 65,000 yuan.

Beginning Jan 1, 2019, China will slash the additional rate of 25%, which will reduce tariffs to 15%. The reduced rate will put U.S. exports at par with other countries within the World Trade Organization. The additional tariff suspension is followed by a trade truce between China and the United States, and will be effective on March 31.

In November, the company announced a similar price cut of its Model X and Model S cars in China to make the cars more affordable for its customers in China. During that time, it slashed the prices of the two models by 12-25%.

Tesla, Inc. Price and Consensus

Steep tariff rates from July strained this U.S.-based electric automaker’s financials in 2018. During the announcement of third-quarter 2018 results, the company reported that high import duties on Model S and X vehicles declined its growth in China. In fact, CFRA analyst, Garrett Nelson, reported to CNBC that Tesla’s deliveries to China accounted for 6% in the third quarter’s total revenues compared with 17.2% in 2017.

Huge prospects for electric vehicles make China a worthwhile market for Tesla that offers alternate-energy cars. However, Tesla’s dependence on imports at times of high import taxes hampered growth. In a bid to increase affordability and reduce shipping costs, the company will start manufacturing vehicles in China by 2019.

In third-quarter 2018, Tesla’s revenues and earnings gained year over year and surpassed respective Zacks Consensus Estimate. For fourth-quarter 2018, it anticipates production and deliveries of Model 3 to increase sequentially. Additionally, the company expects to deliver 100,000 Model S and X vehicles in 2018.

Over the past seven days, the Zacks Consensus Estimate for Tesla’s earnings in the fourth quarter and 2018 has moved up 1.4% and 2.4%, respectively. Additionally, over the past month, the company’s stock has gained 3.5% outperforming 2.4% decrease recorded by the industry it belongs to.

Zacks Rank & Other Key Picks

Tesla currently sports a Zacks Rank #1 (Strong Buy). A few other top-ranked stocks in the auto space are Fox Factory Holding Corporation (NASDAQ:FOXF) , Cooper Tire & Rubber Company (NYSE:CTB) , and AutoZone, Inc. (NYSE:AZO) . Fox Factory currently sports a Zacks Rank #1 while Cooper Tire and AutoZone carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Fox Factory has an expected long-term growth rate of 5%. Shares of the company have increased 40.1% over the past six months.

Cooper Tire has an expected long-term growth rate of 4%. Shares of the company have rallied 13.9% over the past six months.

AutoZone has an expected long-term growth rate of 12%. Over the past six months, shares of the company have gained 26.8%.

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