Costs have been rising over the past few years. For companies, the cost to manufacture goods has risen thanks to higher commodity prices, higher labor prices, and even higher regulatory costs. When any of those costs can go down, profits can improve.
One big way to bring costs down quickly is for regulatory costs to drop. That can include lowering corporate tax rates, or lower tariffs on imported goods.
The European Union is about to launch a 9% tariff on electric vehicles manufactured in China. That’s far lower than an estimated cost of 20.8%. It’s also good news for Tesla Motors (TSLA), which manufactures in China for the European market.
A few other factors are at play which could help the automaker make up for lost ground. EV demand has been lower than expected, given the infrastructure buildout still ongoing for EVs.
Tesla shares are now down 5% over the past year, largely missing out on the market’s big jump higher. Shares trade at 62 times earnings, and those earnings have slowed.
Action to take: Tesla could still surprise investors, as it often does. Shares are a speculative buy at their current level. The company could see some big returns in the years ahead as it focuses on adding AI to automotive technology.
For traders, shares are in an uptrend and may retest their July highs. The November $250 calls, last trading for about $15.30, could see mid-double-digit returns.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.