Tesla Shares, Up 5% Today, Have Now Doubled Off Their Lows Made Barely A Month Ago

As of this morning, shares of Tesla (which are now currently up by 5.3% to $212 on the session) have more than doubled in value from their intraday low barely a month ago, on January 6, 2023.

It marks a stunning move higher in a short amount of time when both Elon Musk’s financial solvency and Tesla demand were popular talking points among the skeptics. 

The pop in shares has come as a result of Tesla finding success in driving more demand by cutting its prices. Heading into the company’s Q4 2022 earnings report, there were looming questions not only about whether or not the price cuts would work, but also whether or not they would drive down margins too much.

But just last weekend we noted that the company’s price cuts were helping spur demand in China that was so robust, it was bucking the national trend for EVs for the month of January. 

TSLA gamma squeeze go brrr

— zerohedge (@zerohedge) January 30, 2023

The company’s China segment shipped 66,051 vehicles in January, according to Bloomberg, citing preliminary data released by China’s Passenger Car Association. In December, that number stood at 55,800.

The figure is up 18% from December, while China’s new energy passenger vehicles, in total, are seen down 45% month over month from December to January. 

The company is now reportedly planning to increase output at its Shanghai plant – bringing its run rate back toward where it was in September 2022 – in order to continue meeting the demand from price cuts on its best selling models. 

Tesla had suspended operations at its Shanghai plant for a portion of December. The EV maker was expected to halt production – as we noted in a previous article – but continued swirling questions about demand had surfaced after the company shut down operations at the key location earlier than expected. Back on December 9th we wrote that the company was shutting down operations due to upgrades at the plant and waning consumer demand.

Meanwhile, looking at the broader scope of EV sales in China, domestic names like Nio, Xpeng and Li Auto all recorded monthly and YOY sales declines in January, per Jalopnik. 

“Apparently, Tesla’s huge discounts [on its Model 3 and Model Y vehicles] siphoned off drivers’ buying interest in the Chinese-developed smart EVs. Overall, demand for expensive EVs appears to be weak, which could lead to price wars in the premium EV segment this year, “Gao Shen, an independent analyst in Shanghai, told SCMP.

And as we detailed days ago, Visual Capitalist’s Marcus Lu says that Tesla’s price cuts are an attempt to protect its market share, but they’re not exactly the desperation move some media outlets have claimed them to be.

Recent data compiled by Reuters shows that Tesla’s margins are significantly higher than those of its rivals, both in terms of gross and net profit.

Our graphic only illustrates the net figures, but gross profits are also included in the table below.

Price cutting has its drawbacks, but one could argue that the benefits for Tesla are worth it based on this data—especially in a critical market like China.

The stock certainly seems to agree…