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Tesla’s price slashes to rev the EV market’s first actual slump stress test

January 17, 2023: As electric-car stocks plummeted in the previous 2022, the rout evoked being compared to the dot-com stock bust two decades ago. Like the internet industry, the EV boasts companies, notably Tesla, that look like long-term winners. Still, it is also made up of young firms that may not have the cash to ride out a downturn and in-between players like Lucid Group, Fisker and Rivian Automotive, which have done their best preparing, and whose fate may depend on the way bad things get.

With the economy at an inflexion point between receding inflation fears and the general expectation of a recession starting in 2023, the market doesn’t know what to make of moves such as Tesla’s significant price cuts, first in China and then on January 13, in the U.S. and Europe.

Analysts such as Guggenheim Securities’ Ronald Jesikow said it could push Tesla’s profit margins by 25% other Wall Street consensus, and drain profits from all of Tesla’s competitors. But optimists such as Wedbush person Dan Ives think it’s the right, aggressive move to begin the EV transition between macro uncertainty.

“Many dot-coms did not make it,” Ives said. “There’s no stress test for a tough slump for an industry in its infancy.”

What happens next, if battered EV stocks rebound, whether young companies that need more funds will be able to get it, and if the sector is being the jobs engine Washington on when it passed the Inflation Reduction Act the previous summer, laden with tax credits for EVs depends on the economy initially, and the markets second.

The “first EV slump” theme comes with a big if that there is a recession in the foremost place, either here or in China, where Tesla sales dropped 44 per cent in December from November levels as the government continued struggling to contain Covid-19.

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Tesla’s price slashes to rev the EV market’s first actual slump stress test