»Tesla reduces vehicle costs to stimulate demand«
Tesla lowered the pricing of many variants of its electric vehicles significantly on Friday, making some of them eligible for a new federal tax credit that could stimulate buyer interest. The company’s sales have slowed and its stock price has plummeted in recent months.
Some versions of the company’s best-selling SUV, the Model Y, saw a price cut of roughly 20% in the United States. This reduction will make more Model Y variants eligible for a $7,500 electric vehicle tax credit available through March. Tesla also dropped the base price of its least expensive model, the Model 3, by approximately 6%.
Friday’s lunchtime trading was marked by a nearly 3% decline in Tesla’s stock price as a result of the steep price cuts, which failed to please investors. Since the beginning of last year, the stock has declined by more than 65 percent. Many investors are concerned that Tesla’s sales downturn will continue, as well as Elon Musk’s erratic conduct and the distractions brought by his $44 billion acquisition of Twitter.
Sam Abuelsamid, an analyst at Guidehouse Research e-Mobility, attributed all of this to a decline in the demand for Tesla vehicles.
Citi industry analyst Itay Michaeli stated in a note to investors that Tesla appears to be emphasizing sales volume over price, a strategy that could temporarily erode the company’s profit margins.
Friday messages were left requesting a response from Tesla.
In the interim, Tesla faces years of increasing competition from other automakers in the United States and beyond. In the United States, EV sales increased by about 65 percent in 2018 compared to 2021. 47 electric vehicle models were sold by automakers, although only four were Teslas. By 2025, S&P Global Mobility anticipates the number of EV models to increase to 159.
And as overall EV sales increase, Tesla’s market share in the United States declines. From 2018 to 2020, Tesla accounted for around 80% of the EV market. According to S&P’s registration statistics, by 2021, this percentage had dropped to 71%, and it has continued to shrink.
Still, Tesla’s U.S. sales increased by 40% last year, and S&P anticipates that trend to continue as electric vehicle sales rise rapidly.
Even with U.S. tax subsidies, electric vehicles remain more expensive than gas-powered vehicles, primarily due to the high cost of batteries. In addition, higher loan rates and more expensive raw materials are maintaining high costs for customers, which could limit EV sales for Tesla and its competitors.
With Friday’s price reductions, the Model Y Performance, originally priced at nearly $70,000, now begins at approximately $57,000. The base price of the Model 3, Tesla’s least expensive vehicle, was reduced from $47,000 to just under $44,000.
Abuelsamid observed that the company’s move to reduce the Model 3’s base price, which was already qualifying for the federal tax credit, is a clear indication that demand has diminished.
Abuelsamid stated that Tesla’s addition of two enormous facilities in Austin, Texas, and Berlin, which are operating at a quarter of their production capacities, “which is undoubtedly costing them dearly,”
»Tesla reduces vehicle costs to stimulate demand«