Tesla Stock in Focus after EV Maker Launches Model Y Financing Initiative

Tesla (TSLA) shares are likely to make their way onto watchlists Monday after the legacy EV maker launched a financing incentive on Friday evening for Model Y purchases in what appears to be the auto giant’s latest initiative to combat increasing competition and sluggish consumer demand.

According to the company’s website, it is offering a 0.99% annual percentage rate (APR) on qualifying Model Y purchases May 10th and May 31st. The incentive applies to 36, 48, 60 and 72-month financing terms, though the APR increases to 2.99% for 84-month financing. A week ago, the quoted rate for Model Y — Tesla’s best-selling vehicle — was 6.49% APR.

Discounted financing is a doubled-edged sword for automakers—on one hand it helps improve deliveries by stimulating demand, but at the same time automakers have to cover the cost of below-market interest rates.

Tesla Faces Increasing Competition, Waning Demand

Tesla’s latest financing initiative follows 18 months of select price reductions across its vehicle lineup in a bid to drive volumes to counter intense competition from Chinese automakers and waning consumer demand for EVs. In February, the company temporarily slashed the price of several Model Y vehicles by $1,000 in the U.S.

While price cuts helped the EV maker deliver 38% more cars last year compared to 2022, they have not had the same effect so far this year. In the first three months of 2024, the company delivered roughly 387,0000 units, down from around 423,000 vehicles in the same period a year earlier.

Monitor This Price if Tesla Shares Regain Traction

After forming a bear trap below the lower trendline of a descending channel in late April, Tesla shares staged an impressive recovery, with the price climbing to the upper portion of the pattern. However, the rally has lost traction in recent weeks, resulting in the price retracing back below the closely-watched 50-day moving average. If the stock can hold current levels, it raises the possibility that Tesla shares may be carving out an inverse head and shoulders bottoming pattern. 

Looking ahead, investors should monitor if the price can close above the formation’s neckline around $197, a move that would confirm the pattern and potentially mark the start of a new trend higher in the stock.

Tesla shares were up 0.3% to $168.90 in premarket trading at around 7:20 a.m. The stock has lost about one-third of its value this year.

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As of the date this article was written, the author does not own any of the above securities.