Tesla Analyst Gary Black Sees Model Y, Model 3 Price Tweaks Coming Next Week Amid EV Credit Changes: 'Net Out To Be Rev Neutral'

Tesla, Inc.’s TSLA continuous price cuts this year have exerted pressure on its margins and stock price. Despite the company halting its downward price adjustments, Future Fund co-founder Gary Black sees potential price hikes for the Model Y EVs, as well as some cuts for Model 3 cars.

What Happened: “$TSLA price matrix in the U.S. is likely to change over the next week to eliminate the distortions caused by the removal of EV credits on M-3 RWD and M-3 LR,” said Black in a post on X. 

For the unversed, Tesla updated information on its website to suggest the $7,500 EV tax credit for the Model 3 rear-wheel drive and long-range EVs will end by Dec. 31, 2023.

Black noted that the loss of the EV tax credit would make the Model Y RWD and long-range variants cheaper than their comparable Model 3 trims. “IMO we will see a combo of M-Y increases and M-3 reductions that net out to be rev neutral to make the pricing matrix consistent with TSLA's historical pricing matrix,” he added.

$TSLA price matrix in the U.S. is likely to change over the next week to eliminate the distortions caused by the removal of EV credits on M-3 RWD and M-3 LR, which makes M-Y RWD and M-Y LR cheaper than comparable M-3 trims. M-X LR is now cheaper than M-S LR. IMO we will see a… pic.twitter.com/H3wVaXrklM

— Gary Black (@garyblack00) December 19, 2023

See Also: Everything You Need To Know About Tesla Stock

Why It’s Important: EV adoption has suffered due to an inclement economy that has stifled demand, while falling used EV prices have made users wary of owning these green-energy vehicles.

Resistance to EV adoption has become entrenched among shoppers, especially those belonging to the lower-income group, according to Autolist, a CarGurus company, based on its annual EV survey conducted in the first half of the year. About 42% of the respondents said EVs are too expensive to buy or lease.

Any price hike, even the reversal of the price reductions announced this year, could pinch consumers at a time when the economy is struggling with an inflationary environment. Although the Federal Reserve paused its rate hikes, some economists fear the lagged impact of the rate hikes could push the economy into at least a mild recession in 2024.

For Tesla, the choice is between the devil and the deep sea. Lower prices have eaten away at the company’s auto margins and, in turn, resulted in subpar bottom-line performance.

Black is among the analysts clamoring for a sub-$30,000 EV that could be affordable for cash-strapped buyers.

Tesla ended Tuesday’s session up 2.04% at $257.22, according to Benzinga Pro data.

Check out more of Benzinga’s Future Of Mobility coverage by following this link.

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