Tesla stock (TSLA): Why is Tesla share price on a rally?

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Tesla share price

Tesla share price has been under pressure since 2022. In 2022, Tesla stock had fallen more than 30%. However, Tesla stock has again gained momentum thanks to the positive analysts calls and few added benefits for EV makers from recently introduced Inflation Reduction Act.

Inflation Reduction Act (IRA) & Tesla

Tesla stock has fallen nearly 10% since the US President introduced the Inflation Reduction Act (IRA) into law in August. 

  • The law is aimed at bringing in regulations that will provide relief to Americans struggling with rising prices (inflation).
  • It aims to curb inflation by lowering prescription drug prices, lowering the deficit, and investing in domestic energy production while promoting clean energy.
  • The IRA allows consumers to receive credit for EVs placed in service until the end of 2032.

There are two ways to look at this law. First, to curb inflation, the government will take measures to control spending (increase interest rates), which is not a good sign for businesses, including Tesla. It could be a reason for the fall in Tesla's share price. However, the law will promote clean energy and customers will receive credit while buying EVs. It is something that Tesla shareholders should focus on.

Tesla's lower cost of goods

  • In 2017, Tesla's automotive cost of goods sold per vehicle was over $70,000, and it fell to $36,000 in 2021. It is a great sign for the company and its investors.
  • Though this metric increased in the second quarter, driven by input cost pressure, factory shutdowns, and factory start-up costs. However, as per experts, this is temporary.
  • The cost of goods sold per car is expected to be lower over time as Tesla benefits from the ramp of the Berlin and Austin factories, scale, vehicle platform, and battery improvement.

Tesla car sales: August Sales Data

  • As per reports, Tesla sold 47,629 cars in August, around 11% more than in July, showing an upward trend month-over-month.
  • Tesla increased its market share in the United States from 2.1% in 2021 to 4.1% this year.
  • In Australia, Tesla outsold the popular Toyota Camry to become the fourth-best selling vehicle in the country in August. 
  • In China, Tesla is building and selling cars more quickly than ever. The company sold 77,000 units of Model 3 and Model Y in August.

Tesla Share Price: Analysts' call

Wolfe Research: An analyst at Wolfe Research has given an OUTPERFORM rating to Tesla and increased the target price from $317 to $360 per share. As per the firm, IRA will act as a catalyst to more quickly boost EV penetration in the US. The law will also encourage consumers to receive tax credits when they buy EVs. They believe that given the stock is down after the IRA announcement, it is a good time to invest in the company.

Goldman Sachs: The analysts at Goldman Sachs believe that there is more upside to Tesla. They have reiterated a BUY rating with a target price of $333.33 per share. They believe that Tesla, given its leadership position in EVs and its focus on clean transportation more broadly, is well positioned to capitalize on the long-term shift to EVs. They expect Tesla to expand margins in the intermediate term as it ramps up the important Model Y product as well as new factories in Berlin, Germany, and Austin.

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What is the latest inflation rate in the USA?

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