Tesla has recently taken a significant step by removing its most affordable Model 3 sedan from its website's US order page. This action comes as a response to the recent tariffs imposed on Chinese imports, which have created a complex landscape for US automakers. Analysts at Wedbush Securities, including Daniel Ives, have indicated that these tariffs present a "double-edged sword" for the industry.
The Model 3 standard range rear-wheel drive, initially priced around $39,000, utilized lithium iron phosphate battery cells sourced from China. These relevant components are now subject to new tariffs, featuring a 100% duty on electric vehicles (EVs) and a 25% duty on EV batteries and key minerals. As a result, vehicles relying on these lithium iron phosphate battery cells manufactured in China no longer qualify for the $7,500 federal EV tax credit.
With the removal of the Model 3 standard, Tesla finds itself in a position where it does not offer any cars with this type of battery. This shift has raised concerns among analysts regarding Tesla's ability to navigate the evolving tariff landscape. Increased taxes on Chinese EVs sold in the US are seen as beneficial for domestic automakers, as they may alleviate the competitive pressure posed by manufacturers like BYD, Nio, and Xpeng.
Nonetheless, the reliance on battery and component technologies from China complicates Tesla's positioning. During midday trading, shares of Tesla experienced a decline of 2.7%. The company's third-quarter delivery figures reportedly fell short of Wall Street expectations, further impacting market sentiment.
Despite these challenges, Wedbush has maintained an outperform rating and a target price of $300 on Tesla's stock, highlighting the potential for the company to tap into US demand as most of the price reductions recede into the past. For prospective Tesla customers seeking an entry-level vehicle alternative, the Model 3 long range rear-wheel drive emerges as a viable option, retailing at approximately $42,500, or $35,000 after accounting for the tax credit.
This situation presents a complex yet intriguing phase for Tesla as it strives to adapt and thrive amidst shifting market dynamics..