Tesla’s stock (TSLA) jumped today after President Trump announced changes at his prices, which were set up a few hours ago.
However, this decision is irrational because Trump has considerably increased prices on China, which will destroy Tesla’s energy activity.
Trump’s “reciprocal prices” announced last week came into force at midnight.
The president implemented a basic rate of 10% on all imports, then added up to 49% of “reciprocal rates” on countries. The term “reciprocal” is not correct because it has based the prices on the American trade deficit with each country rather than the real rates they place in the United States.
The announcement sent the stock markets that crashed last week and the experts were very critical of Trump because countries cannot negotiate to remove prices that do not exist.
Today, only a few hours after setting up prices, Trump announced that he was stopping the “reciprocal prices” for 90 days.
However, it retains new 10% prices on all imports at all levels, and he announced that it increased the prices by 104% previously announced on China to 125%.
This decision referred the stock markets.
Tesla also increases on news
Tesla’s shares have also increased on the news, by 20% at the time of writing, but we do not know why.
The company was not greatly affected by the “reciprocal prices” which have been interrupted, but the prices on China which have been increased have a massive impact on Tesla.
As we mentioned above, all of Tesla’s energy activity, which is its only growing activity, is based on the importation of cheap Chinese battery cells in the United States, building them in batteries (megapacks and power bites) and selling them worldwide.
Now, these cells will cost 125% more, which will probably double the price of its stationary batteries.
Tesla also recently started production in a new megofactory in Shanghai to produce the megapack. The battery systems that come out of this factory should be shipped to markets outside the United States and should allow Tesla to remain competitive outside the United States.
However, Chinese prices have just thrown a key in Tesla’s megofactory to Lathrop and its production from Powerwall in Nevada.
In addition, Tesla also recently announced its intention to build a second megofactory in the United States to build more megapacks. It is not clear if Tesla also planned to use Chinese battery cells for this plant.
Tesla uses China battery cells for its stationary storage product because it is the only country that produces LFP battery cells at low cost in high volumes.
Electrek taking
I say that I do not know why Tesla has also increased on this news, but it is mainly because it is a stock of memes now. He does not really negotiate on his real profit potential.
In addition, Tesla’s shareholders seem to be ignored on what is happening.
This trade war with China is terrible for Tesla. All important prices on Chinese imports will considerably increase the price of wicks and megapacks – paralyzing the only growing commercial unit of Tesla.
In addition, if this business war is getting worse, Tesla should expect Chinese buyers to reduce their interest in the purchase of vehicles from American brands.
Although I don’t think we are still there, I think that if it continues to degenerate, Tesla should even worry about the status of Gigafactory Shanghai.
The only positive thing for Tesla in Trump’s pricing strategy, if you can call it a strategy, is that it is entirely incompetent and will likely bend.
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