Tesla Price Cuts in China Can ‘Stimulate Demand’ Says RBC Capital

After Tesla cut the price of the Model 3 and Y in China, some bears saw the move as evidence that the company’s demand was diminishing, though one firm reiterated its bullishness on the stock amidst the claims.

RBC Capital’s Joseph Spak defended Tesla’s 5-percent price cuts in China, saying that the firm isn’t as concerned with the price cuts as bears (via @Sawyer Merritt).

Spak also added that the move could even help increase demand in the country, especially with CEO Elon Musk speaking to the “recession of sorts” that China is currently going through.

“We are a bit less concerned than bears and believe this can help stimulate demand in China,” Spak said in a note to clients. “Bearishness on TSLA has increased primarily on demand in China and the specter of price cuts.”

In the note, Spak also reiterated an Outperform rating on Tesla’s stock with a $325 price target.

In September, Tesla delivered 77,163 vehicles in China, marking the U.S. automaker’s second-most vehicles delivered in the country within a single month.

Tesla is also expected to begin delivering the Model S and X Plaid editions in China soon, with the vehicles now listed under the country’s tax exemption catalog.

EV makers in China are being hit hard today, with NIO down 17%, while Tesla shares are down 3% to $206.85 as of writing.