Europe’s auto stocks drop as Tesla lowers U.S. prices
Geoffrey Smith
Investing.com — European automobile stocks fell Friday following a Tesla price reduction (NASDAQ:TSLA). This increased fears about a weakening global demand in 2023.
Stellantis, the owner of Jeep, Chrysler and Fiat brands, suffered a 3.5% loss, while Volkswagen (ETR.VOWG_p), Mercedes Benz and BMW (ETR.BMWG stock) all lost 2.4% and 2.4% respectively. These four stocks are the worst performers in Euro Stoxx 50 index, which was largely higher than European stocks due to a better inflation outlook in the U.S.
Tesla, a U.S. manufacturer of the Model 3 and Model Y SUV Crossover mass-market models, announced that it will reduce its prices on Thursday, as a way to keep sales going. the company Wall Street forecasts of fourth-quarter deliveries fell short. The latest signal that Tesla, which has had long waiting list for its cars since its inception, now faces the same type of demand problems as other mature automakers is the news.
According to Reuters, a spokesperson for the company said that the move was driven by a recent decrease in input costs due to an easement of supply chain bottlenecks.
“At the conclusion of a turbulent and interrupted year, we have achieved partial normalisation cost inflation which gives us confidence to pass this relief on to our customers,” said a spokesperson from Tesla Germany.
Any move by Tesla in order to lower prices will hurt European carmakers. European carmakers operate on very thin profit margins, particularly Stellantis or Volkswagen. Tesla announced price cuts that will make it eligible for the $7500 tax credit, which was instituted by the Biden Administration last year to encourage electric vehicle adoption. It increases Tesla’s market competitiveness in price-sensitive markets.
It is notable that of all the European stocks under review on Friday, the highest-end Porsche, which doesn’t make any pretenses to affordability, fared the best. Porsche Preferred (ETR.P911_p stock was down just 0.6% as of 06:00 ET (11:00 GMT).
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