By Al Root
Investors didn't seem to like Tesla raising prices of its popular Model Y vehicles in the U.S. over the weekend. Rising costs could become a problem.
Shares of the electric vehicle maker were down 0.7% at $406 in premarket trading on Tuesday, while S&P 500 and Dow Jones Industrial Average futures were down 0.2% and 0.1% respectively.
The move came after a 2.9% dip on Monday. There wasn't much to blame the decline on, no Wall Street downgrades or material price target cuts.
Tesla raised prices for some of its cars over the weekend. The higher-end Model Y trims went up by $500 to $1,000. Model 3 prices stayed the same. It was the first U.S. Model Y increase since 2024.
The move was a small surprise. More EV competition and increased U.S. production capacity have kept a lid on pricing. What's more, the average price of a new EV is down about $3,000 since the September expiration of the $7,500 federal purchase tax credit, to about $55,000.
Tesla might be trying to offset higher prices for memory and copper, wrote Barclays analyst Dan Levy on Monday. Higher prices for memory were called out by General Motors on its first-quarter earnings conference call.
Materials inflation that is tough to offset isn't a positive for any company. Managing profit margins hasn't been easy amid slowing demand. U.S. EV sales dropped 27% year over year in the first quarter. Tesla's first-quarter automotive gross profit margin, excluding the impact of regulatory credit sales, was about 21%, up from 14% a year ago, but far from its first-quarter 2022 peak of about 32%.
The first quarter of 2025 was also impacted by the rollout of Tesla's updated Model Y.
Tesla stock doesn't always move based on EV sales. Investors have been more focused on AI efforts such as robo-taxis and robots. Still, selling cars is Tesla's largest business, and Levy expects U.S. EV demand to remain weak, leaving Tesla to rely on its Full Self-Driving $(FSD)$ driver-assistance product to drive volume.
FSD costs $99 a month and can do most of the driving most of the time. Tesla disclosed 1.3 million subscriptions at the end of the first quarter, up from about 850,000 a year ago.
He rates Tesla stock Hold and has a $360 price target. The average analyst price target for Tesla stock is about $400, according to FactSet.
Coming into Tuesday trading, Tesla stock was down about 9% year to date and up 17% over the past 12 months.
Write to Al Root at allen.root@dowjones.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
May 19, 2026 05:22 ET (09:22 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
Comments