Tesla stock was trying to avoid a third consecutive day of declines as investors weighed what big price increases for Tesla’s most popular cars in Canada mean for overall EV pricing and demand in 2025.
Shares of the electric vehicle maker were up 0.2% at $414.31 while S&P 500 futures were off 0.1% and Dow Jones Industrial Average futures were up 0.1%.
That Tesla stock is wavering is probably not a surprise. Tesla’s Canadian website says that Model 3 prices will increase up to $9,000 on Feb. 1. A Model 3 in Canada starts at about $56,000. The high-end version of the 3 starts at $71,000 so a $9,000 hike is equivalent to a roughly 13% increase.
Model Y prices could go up $4,000 on Feb. 1. A Model Y starts at bout $61,000 in Canada. The high-end version of the Y starts at about $70,000 so a $4,000 hike is a roughly 6% increase.
The timing, amount, and location of the price increases are all interesting.
Feb. 1 is in the early part of the first quarter. Car companies, including Tesla, often use incentives and potential price increases to drive demand around the end of a quarter or the end of a year. Buy now before prices move. That isn’t the case here.
Feb. 1 is also the day that President Trump’s proposed 25% tariffs on Canada and Mexico might go into effect. That may be a coincidence, but perhaps not. A lot of parts and cars are made in Canada and Mexico. A 25% tariff could increase the average price of a new car by up to 10%. But that is on cars in the U.S. Tesla makes most of the cars it sells in Canada in the U.S. Tesla could be looking to offset tariff-induced higher prices for car parts made in Canada and Mexico.
Tesla didn’t respond to a request for comment about the increases.
The price increase is significant, however. Higher prices for any good can drive down demand. A roughly 10% reduction in affordability — from higher prices and higher interest rates — has driven down U.S. car demand by roughly 10% since the pandemic. Double-digit price increases almost certainly mean lower sales for any good — including Teslas.
The Canadian price increases come as investors weigh President Trump’s promise to eliminate the $7,500 purchase tax credit for qualifying EV purchases in the U.S. That amounts to a 5% to 10% price increase for many popular EVs.
Prices for EVs are going up in Canada and the U.S. while EV sales growth slowed in 2024. Americans bought about 1.3 million EVs, up about 7% compared with 2023. Growth in 2023 was closer to 46% year over year.
If Tesla shares finish in the red it would be a third consecutive drop. Still, coming into Thursday trading, Tesla stock was up 5% over the past week, 3% year to date, and 65% since the Nov. 5 presidential election.
Investors expect CEO Elon Musk’s close relationship with Trump to yield benefits. Investors are focused on the potential for Federal standards to smooth the introduction of self-driving cars. Tesla plans to launch a self-driving robo-taxi service in late 2025. That, for investors, is more important than selling EVs right now.