TSLA: Tesla Stock Almost Out of Year-to-Date Slump. How Do Rate Cuts Affect the EV Maker?

Analysts expect Elon Musk’s carmaker to log more sales now that rate cuts make car financing more affordable.

• Tesla stock TSLA is reeling itself out of a slump that’s more or less defined the automaker’s performance this year. Shares of Elon Musk’s electric-car manufacturer dropped 2% on Friday but boast gains of 10% over the past week when the US Federal Reserve decided to cut interest rates by 0.5% or 50 basis points. Special thanks goes to Jay Powell, Fed Chair, who said officials moved confidently and are looking to slash rates by another half point still this year.
• So what’s the relationship between interest rates and Tesla’s share price? Markets were excited to ramp up their long bets on Tesla in anticipation that sales are about to get a lift. And sales do need a lift — revenue growth has dwindled to a mere 2% year-over-year clip, landing at $25.5 billion for the June quarter. Preliminary figures from data platform ACEA show Tesla’s revenue in Europe nosedived 36% in August from the same month last year.
• Now that the Fed has cut rates and the European Central Bank has cut rates twice this year, financing for cars — a product that’s usually bought with a bank’s participation — will become more affordable. Shares of Tesla were down by 40% at their lowest point for the year. It’s not just Tesla — car stocks in general may get a boost if investors see that the sales numbers are picking up speed.