After lowering the price tags on many Tesla EVs this year, Elon Musk’s company finally raised prices on a key model, in a manner of speaking.
Tesla (ticker: TSLA), on Friday, unveiled its updated Model 3 electric vehicle in China. The global EV leader is hoping to boost sales of a model that appeared on roads in 2017. The new versions are also more expensive.
Rising prices are something new for the EV industry in 2023—prices had been going the other way for months.
The Model 3 overhaul includes a new interior and a longer per-charge range. The base Model 3 will go about 380 miles on one charge, up about 30 miles from the old version. Those are the numbers based on the way China estimates range. Ranges coming from the Environmental Protection Agency are typically lower than that because they test EVs differently.
The price for a new base Model 3 is up about 12% to $36,000.
Tesla
(ticker: TSLA) also slashed prices on its expensive Model S and Model X cars, which start at about $100,000.
Tesla cut prices significantly at the start of the year on most of its models, resulting in lower profit margins. Tesla’s operating profit margin in the second quarter was 10%, compared with 15% in the year-ago quarter.
Investors don’t want to see more price cuts, but the X and S are relatively low-volume vehicles. The bigger deal is the price for the updated Model 3.
Higher prices help boost profit margins, and updated vehicles can boost sales volumes. In the U.S., Tesla sold 112,791 Model 3 sedans in the first half of the year, up about 12% from the same span of 2022. It was an increase, but below the levels for the market and the Model Y. In the U.S., Tesla sold more than 200,000 Ys in the first half of 2023, up more than 50% year over year.
Tesla is expected to sell roughly 1.8 million cars around the world in 2023, up from 1.3 million sold in 2022. Wall Street projects 2.4 million units for 2024. The new Model 3 is expected to help Tesla’s growth.
In China, new and updated models can also help battle price cuts from other automakers. Citi analyst Jeff Chung counted some 25 cuts on EV models in August. Cuts have come from Tesla and others including
BYD,
NIO
(NIO),
XPeng
(XPEV).
Tesla sold roughly 294,000 units in China in the first half of 2023, up almost 50% year over year. It can be tough to judge growth and market share in China. Tesla serves the Chinese market and the European market from its plant in Shanghai.
Model releases are typically good for Tesla stock. But shares fell 5.8% Friday, while the
S&P 500
rose 0.1% and
Nasdaq Composite
slipped 0.1%.
The market is still digesting what the new Model 3 means for Tesla’s sales growth and market share in China. With prices down, it might be hard for Tesla to boost sales with a higher-priced model. A price increase from a market leader, however, might be a welcome chance for other players to stop cutting, or even start lifting, prices for EVs in China.
Tesla shares’ decline could also be a case of sell-the-news. The stock market tends to anticipate big events and an updated Model 3 has been a watch item for investors for months. Coming into Friday trading, Tesla stock has risen almost 18% over the past two weeks, and has more than doubled this year.
Investors might also have wanted more from the car, and they could still get it.
The upgraded Model 3 is available in China and Europe but not in the U.S. An upgraded Model 3 would be “a big needle mover when this happens,” says Wedbush analyst Dan Ives.
An updated U.S. version of the car could be different than the model in China and Europe because U.S. models of all cars tend to be a little different. The U.S. market has different safety standards than China and Europe; Chinese and European standards align more closely.
Tesla stock is also volatile, a factor that makes it tough to figure out exactly how the market feels about any one data point.
Write to Brian Swint at [email protected]
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