Tesla, Inc. TSLA has raised prices of Model X and Model S vehicles by 20% in China, per Reuters. In fact, this Palo Alto, CA-based electric vehicle (EV) manufacturer turned out to be the first automaker to increase prices in China - the largest automotive market in the world. The automaker has resorted to this move as the U.S.-China trade war started to affect auto companies.
In response to Trump' move to levy tariffs on $34 billion worth of Chinese goods, China imposed retaliatory tariffs on U.S. car imports. China's tariffs are likely to hurt manufacturers of industrial components in the United States as well as the automakers. For Tesla, which is incurring huge loss, China is a very important market. In fact, in 2017, the mainland accounted for 17% of its revenues. It is expected that the hike in prices is going to adversely affect sales but, Tesla can't afford the rise in tariffs.
Importantly, the decision of price hike comes as Tesla intends to set up a factory in Shanghai to cater to the Chinese market. Some experts are of the opinion that the affluent customers of Tesla are price insensitive and are more concerned about the product experience and brand image. But, all Tesla customers may not be price-insensitive.
In the past three months, shares of Tesla have outperformed the industry
it belongs to. Its stock has grown 5.9% in comparison with the industry's decline of 4.8%.
Tesla currently has a Zacks Rank #3 (Hold).
A few better-ranked stocks in the auto space are American Axle & Manufacturing Holdings, Inc. AXL
, Magna International Inc. MGA
and Fox Factory Holding Corp. FOXF
, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here
American Axle & Manufacturing has an expected long-term growth rate of 8.1%. Over the past year, shares of the company have gained 5%.
Magna has an expected long-term growth rate of 8.5%. Over the past year, shares of the company have gained 26.6%.
Fox Factory has an expected long-term growth rate of 12.5%. Shares of the company have risen 41.5% over the past year. The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early. See Zacks' 3 Best Stocks to Play This Trend >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Tesla, Inc. (TSLA): Free Stock Analysis Report Fox Factory Holding Corp. (FOXF): Free Stock Analysis Report American Axle & Manufacturing Holdings, Inc. (AXL): Free Stock Analysis Report Magna International Inc. (MGA): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research