Tesla slashes pricing in an effort to stimulate lagging sales
Tesla Inc. reduced pricing on numerous electric vehicles Friday, making them eligible for a new federal tax credit that may boost sales.
The top-selling Model Y SUV was discounted roughly 20% in the US. That decrease will qualify more Model Y models for a $7,500 electric-vehicle tax credit through March. Tesla has cut the Model 3’s basic price by 6%.
Tesla stock fell roughly 2% Friday afternoon because of the dramatic price decreases. The stock fell almost 65% last year. Many investors worry that Tesla’s sales slump will continue and that CEO Elon Musk’s unpredictable behaviour and $44 billion Twitter purchase will distract him.
“I think the real driver for all of this is falling demand for Teslas,” said Guidehouse Research e-Mobility researcher Sam Abuelsamid.
Scott Case, CEO of Recurrent, an EV industry analyst, said Tesla’s once-large order backlog may have been drained due to its current short delivery timeframes.
Case said customers went to competitors or awaited this year’s government tax rebates.
Due to manufacturing and battery efficiency, Tesla can earn money on EVs, Case claimed.
Tesla’s economies of scale and other advantages make price decreases difficult for competitors. If so, Tesla might sustain car sales.
“They can afford to make this cut and not be lighting money on fire,” Case added.
Tesla will continue to face intense competition from other automakers in the US and beyond. Sales of electric vehicles in the United States increased by about 65% in comparison to the year 2021. Tesla sold four of 47 electric vehicles. S&P Global Mobility forecasts 159 EV models by 2025.
As EV sales rise, Tesla’s U.S. market share falls. Tesla has 80% of the EV market in 2018–2020. S&P registration data shows that figure dropped to 71% by 2021 and has continued to fall.
Tesla’s U.S. sales grew 40% last year, and S&P expects them to rise as electric car sales rise.
Even with U.S. tax subsidies, EVs cost more than gas-powered automobiles due to battery costs. Higher loan rates and raw material prices may limit EV sales for Tesla and its competitors.
Edward Jones analyst Jeff Windau said those reasons are lowering demand for all automobiles, not just Teslas.
Musk’s Twitter antics may have lowered demand. Musk has relaxed hate speech and other rules since taking over Twitter in October.
In the past six months, Case has heard longstanding Tesla consumers express they no longer want to be seen in a Tesla and would consider buying a competitor’s EV.
Tesla’s Model Y Performance now begins at $57,000 after Friday’s price decreases. The Model 3, Tesla’s entry-level car, dropped to $44,000 from $47,000.
Abuelsamid observed that the Model 3’s basic price decrease, which was already eligible for the federal tax credit, indicated weakening demand.
“which is undoubtedly costing them dearly,” Abuelsamid said of Tesla’s two massive facilities in Austin, Texas, and Berlin.