Why Is Tesla (TSLA) Stock Down Today?

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Tesla (NASDAQ:TSLA) stock is sinking 3% in early trading amid fears about Chinese President Xi Jinping’s leadership reshuffling. Specifically, the Street, along with Chinese investors, are worried that some of the new faces in Beijing will not be as pro-business as in the past.

TSLA produces and sells hundreds of thousands of electric vehicles in the Asian country. Also worth noting is that the automaker has decided to reduce the prices for two of its most popular models in the nation.

Meanwhile, a wide variety of U.S.-listed Chinese stocks, along with Hong Kong’s stock market, are also retreating sharply today.

The New Leadership Team and Stocks’ Reactions

Chinese President Xi Jinping was, as expected, selected to serve a third term as president and to continue leading the Chinese Communist Party yesterday. Xi, however, made major changes to his inner team.

According to CNN, the outgoing members of the government’s inner circle were generally viewed as being friendly to free-market ideas, while their replacements are seen as very loyal to President Xi.

Chinese stocks reacted poorly to the news. In U.S. markets, Alibaba (NYSE:BABA) tumbled 11% to $64, Nio (NYSE:NIO) fell 8.5% to $10.25, and JD.com (NASDAQ:JD) sank 14% to $36.25. Meanwhile, Hong Kong’s Hang Seng market tumbled 6.4% and China’s Shanghai Composite Index gave back 2% today.

TSLA Stock: Tesla’s Price Cuts

Amid recession fears in China, Elon Musk’s EV company lowered its base price for its Model 3 in China to 265,900 Chinese yuan from 279,900 Chinese yuan. The automaker also reduced the base price of its Model Y SUV to 288,900 yuan from 316,900 yuan.

However, the price cuts follow in the wake of price increases that the automaker implemented earlier this year in response to its rising costs.

On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Larry Ramer has conducted research and written articles on U.S. stocks for 15 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been GE, solar stocks, and Snap. You can reach him on StockTwits at @larryramer.

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