Any time a company in the automotive industry slashes their prices, it’s usually a bad sign. So when Tesla announced recently that it was reducing the prices of their electric cars by as much as 6%, consumers and investors alike paid attention. However, as an investor, it’s important to remember that Tesla doesn’t operate quite like other vehicle manufacturers. There are a lot of unknown aspects of exactly why these price reductions occurred, but here are some of the impacts an investor can expect as a result of them.
Tesla Price Cuts May Not Be Bad For Investors
The high price of a Tesla car has always limited its consumer base. With the economic uncertainty we are facing currently, the demand for vehicles, in general, have gone down. So while we have seen companies offer financial incentives and deferred payment options, Tesla has taken the approach to simply lower the price of their cars. On the surface, it seems like this strategy was put in place to stimulate demand and boost production orders. However, it could also be coincidental timing and a perfect storm of the company improving their production rates and manufacturing costs, thus being able to offer their cars at lower prices.
The Impact Of COVID-19
The COVID-19 pandemic absolutely has had an impact on Tesla, as it has with virtually every company worldwide. But when you look at Tesla’s Q1 numbers in 2020, it reported the highest order backlog they’ve ever experienced. This indicates the demand for Tesla cars is still high and any negative impact COVID-19 had on the demand didn’t significantly slow down growth. If anything, Tesla may have reached a point where their supply and demand numbers are equal and have reduced their prices to give consumers who may be on the fence an incentive to purchase now.
Investors Should Be Patient With Tesla’s Strategies
Putting any financial knowledge aside, an investor simply needs to be patient with Tesla’s current and future strategies. The company is in a unique position to be able to have some flexibility since it operates in a niche market with not much competition for electric cars. Everything from factory shutdowns to economic distress has played a role in shaping short-term and long-term strategies. It still may be too early to tell exactly whether these strategies will fail or pay off major dividends, but as an investor, it’s worth being patient to see.
Stock Investing Info is here to help investors find financial success no matter what that looks like for them. Whether you currently invest in Tesla or are interested in doing so, they are a company you always have to watch and be patient with. As with many investments during these times of economic uncertainty, the best strategy is often to remain patient and see how the next few months play out. Investing in Tesla is no different, so contact us if you have any questions, concerns or thoughts about your investing strategies moving forward.