Why Tesla stock was climbing today

Investors were encouraged by news of a price hike on the Model Y.

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Image source: Tesla

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Shares of Tesla (NASDAQ: TSLA) were moving higher today after the leading electric vehicle (EV) maker surprised investors by announcing price hikes on its Model Y crossover vehicle over the weekend.

The price increase bucks the recent trend in the EV industry, as prices have fallen due to increasing competition and plateauing demand from car buyers.

As of 2:14 p.m. ET, Tesla stock was up 6.2% on the news.

Tesla Model Y prices are going back up

Tesla announced two separate price hikes on its Model Y, the world's top-selling vehicle.

First, the company said on Friday that it would raise prices by $1,000 on all Model Y vehicles in the U.S. by April 1. Then on Saturday, it announced that it would raise prices in several European countries on the crossover SUV by 2,000 euros, or $2,177.

The company had also raised the price in the U.S. of the Model Y rear-wheel drive and long-range trims by $1,000 on March 1.

CEO Elon Musk explained the move as a seasonal one, saying that consumer demand is seasonal, though manufacturing needs to be steady throughout the year. Car-buying tends to pick up in the spring in the U.S. as Americans receive their tax refunds.

What's next for Tesla?

Some analysts speculated that the decision could be more geared toward giving first-quarter deliveries a sales bump at the end of the quarter, as higher prices could persuade hesitant buyers to make a purchase.

Goldman Sachs, for example, lowered its price target on the stock after channel checks showed Q1 deliveries tracking lower than previously expected, at just 435,000. Deutsche Bank also said the move was designed to boost first-quarter sales.

Nonetheless, the price increase should help lift profit margins in the second quarter, which have been falling over the last several quarters.

With the stock still down sharply this year, the news also gives Tesla bulls a reason to be optimistic, though the company is still sensitive to overall demand trends in electric vehicle stocks. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Motley Fool contributor Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group and Tesla. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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