Why is Tesla collapsing before its stock split | The Motley Fool

The stock market is having a rough day on Monday, and the Nasdaq Compound (^IXIC -2.55%) opens the way below. As of 12:30 p.m. ET, the Nasdaq was down 259 points, or about 2%, at 12,447. That was worse than other major stock indices, which were typically down about 1.5% in early trading. ‘afternoon.

You’re here (TSLA -2.28%) has been a strong performer on the Nasdaq for the past few years, but that didn’t help the index’s cause on Monday as the stock fell more than 2%. The electric vehicle pioneer reported mixed news over the weekend, making investors think twice about the stock even as the company plans to move forward with its equity split later this week. You will find all the details below.

Higher prices for access to self-driving capabilities

Over the weekend, Tesla announced it would increase the amount charged to give auto buyers potential access to the full self-driving capability of its vehicles. Currently, customers pay $12,000 when ordering a vehicle for the option to receive comprehensive self-driving updates. Starting September 5, according to a tweet from CEO Elon Musk, that price will increase to $15,000. The move marks the second time this year that Tesla has raised the price of the service, which started in 2022 at $10,000.

The move is in line with Tesla’s long-term plan to raise the price of fully autonomous driving as its functionality expands. In the long term, Tesla hopes that if it can get regulatory approval for a system that will actually handle driving the car on its own without any operator oversight, it can charge up to $100,000 or more. potential vehicle buyers. . The reduced price now reflects the fact that the system lacks regulatory approval and lacks the features that would allow Tesla vehicles to drive themselves fully autonomously.

Red Tesla Roadster on a road.

Image source: Tesla.

A great victory of recent legislation

Tesla is also shaping up to be a big winner from passing the Cut Inflation Act. The new law included many different incentives for renewable energy initiatives, but most importantly for Tesla, it essentially reset the clock for tax credits tied to electric vehicle purchases. Because the original tax credit provisions set limits on the number of vehicles that could be eligible, Tesla buyers were no longer eligible to receive the same credits that previous buyers had received under the old law.

The new law will once again give Tesla buyers the chance to get up to $7,500 in early 2023. That could give the automaker an extra boost, and while demand for the vehicles has remained strong, every incentive could be valuable to Tesla. in its efforts to maintain its strong growth trajectory in the future.

The split is coming

Meanwhile, this week will bring the completion of the long-awaited Tesla stock split. The company’s 3-for-1 split will go into effect after markets close on Wednesday, August 24. Investors will be able to buy and sell shares after the split for the first time on the morning of Thursday, August 24. 25.

Stock splits don’t have a fundamental impact on a company’s business, but investors still often see them as a positive sign of optimism. Falling stock prices may make it easier for small investors to buy whole stocks, although many brokerage firms offer fractional stock buying capabilities that have allowed those with less than $800 to $900 $ to buy Tesla shares for amounts less than a full share.

In the long term, the prominence of business moves like fully self-driving, as well as the financial effects of government incentives, will have a bigger impact on Tesla stock than a split. When the split is finally complete, investors will likely return their attention to more important matters.

Dan Caplinger has no position in the stocks mentioned. The Motley Fool holds positions and endorses Tesla. The Motley Fool has a disclosure policy.

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