On Friday, Tesla's share price witnessed another uptick.
After Tesla (TSLA -3.39%) reported its fourth-quarter earnings on Wednesday, investors were left scratching their heads. Shares saw a rollercoaster ride before ending the day approximately 3% higher. This positive momentum carried over to the following day, with shares rising an additional 5% at 2:35 p.m. ET, making for a 2.6% overall gain.
The stock's resilience wasn't solely due to the earnings report. Conversations about Tesla's self-driving software and upcoming products also fueled the rally. During the investor call, CEO Elon Musk announced that Tesla would introduce unsupervised self-driving electric vehicles (EVs) as a paid service in Austin, Texas, starting in June. This service would be a game-changer for the company, with plans to quickly expand to other locations if all goes well.
However, Tesla's stock surge was also driven by news of impending 25% tariffs on imports from Canada and Mexico, set to take effect tomorrow. Reports suggesting this policy shift has left many North American automakers on edge, especially those with production plants in both nations.
This potential tariff increase could impact Tesla in three main ways:
- Increased Production Costs: If Tesla depends on critical components such as batteries, chargers, and other vehicle parts from Canadian or Mexican suppliers, the imposed tariffs would lead to higher production expenses.
- Consumers and Pricing: Should Tesla decide to carry these increased costs, EV prices could rise, making them less competitive against gasoline vehicles. Alternatively, Tesla may opt to pass these costs onto customers, further impacting demand.
- Supply Chain Disruptions: The tariffs could disrupt Tesla's supply chain, particularly if the company heavily relies on Canadian and Mexican suppliers. Delays in production and delivery could arise, leading to difficulties in meeting sales targets.
While companies like General Motors and Ford will also feel the brunt of these tariffs due to their import reliance, their more diversified sourcing strategies and manufacturing bases might partially protect them from the worst of the impacts. However, Tesla's competitive edge in the EV market may be threatened if increased costs and disrupted supply chains affect its market share in large U.S. EV markets such as California, where its share is already on a downward trend.
In light of the potential 25% tariffs on imports from Canada and Mexico, Tesla might need to reconsider its financing strategies to manage the increased production costs. This could involve seeking new investment opportunities in the finance market to offset the additional expenses.
The impending tariffs could also influence Tesla's investing strategy, as the company may need to explore alternative suppliers to mitigate the risk of supply chain disruptions and maintain its competitive edge in the EV market.
