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HomeMarketTesla's $7,500 Discount Is Great for Buyers. Less So for Investors.

Tesla’s $7,500 Discount Is Great for Buyers. Less So for Investors.

Most of the cars Tesla sells in the U.S. come from its Fremont, California assembly plant.

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Justin Sullivan/Getty Images

Tesla
is upping the discount car buyers can get if they take delivery of a new electric vehicle by the end of the year. It’s great for car buyers. It’s a test for investors.

Tesla
‘s U.S. website now includes the offer to “take delivery of a new Model 3 or Model Y between Dec. 21 and Dec. 31, 2022 for a $7,500 credit and 10,000 miles of free Supercharging.

That Supercharging benefit is a little like a year of free gas which, for a driver going from gas to electric, would save another $1,500 or so.
Tesla
owns and operates the largest network of direct current fast charges in America.

It’s a good deal and the incentives are up from just a few weeks ago when the offer was $3,750 for a new Model 3 or Model Y.

The original $3,750 off was likely designed to offset any demand weakness from the coming tax credits that were passed as part of Inflation Reduction Act. EV buyers will get a $7,500 tax credit on qualifying EVs starting on Jan. 1. Without an incentive from Tesla, or other auto makers, it made little sense for a shopper to buy an EV so close to year end.

The exact reasoning behind Tesla’s deal isn’t known. The deal could signal a demand problem caused by economic weakness and not just tax credit implementation. Tesla didn’t respond to a request for comment about the $3,750 offer or the new $7,500 offer.

How investors react to increasing incentives will be an interesting test for Tesla stock. Investor sentiment is, well, terrible.

Tesla shares have been badly beaten up for several reasons including rising interest rates, inflation, a weakening economy, falling prices and CEO Elon Musk’s management of Twitter. The stock is down roughly 40% since Musk took over his social media platform and about 62% this year.

The drop from the start of the year to the Twitter purchase wiped out roughly $400 billion in market value. The drop from the purchase to today has wiped out another $270 billion. Tesla is still the most valuable car company in the world worth some $430 billion.
Toyota Motor
(TM) is number two, worth about $220 billion.

Investors selling more Tesla stock in coming days is a sign they are worried about EV demand heading into 2023. If shares settle down a little, it is a sign that investors view the incentives as a good idea ahead of a change in the laws.

Incentives are a normal part of the process for any car buyer. Everyone wants a deal. But Tesla, relative to the rest of the auto industry, is new and investors aren’t all that used to seeing deals from Tesla.

Investors will have to wait and see what happens with fourth quarter deliveries and any guidance the company will offer for 2023 sales.

Wall Street expects about 420,000 to 430,000 units to be sold in the last three months of the year. That would be a quarterly record. Delivery results are due out in the first couple of days of the new year. Any guidance would come with earnings that will be reported a few weeks after that.

It will be interesting to see what happens next.

So far not much is happening. Tesla stock is up 0.6% in premarket trading Thursday.
S&P 500
and
Dow Jones Industrial Average
futures are both down about 0.2%.

Write to Al Root at allen.root@dowjones.com

Credit: marketwatch.com

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