Tesla lowers vehicle prices in a bid to stimulate falling demand

Tesla lowers vehicle prices in a bid to stimulate falling demand

Tesla lowers vehicle prices in a bid to stimulate falling demand

With its sales slowing and its stock price plummeting, Tesla on Friday dramatically slashed the prices of several versions of its electric vehicles, making some of its models eligible for a new federal tax credit that could help boost the economy. interest of buyers.

The company has cut prices by nearly 20% in the United States on some versions of the Model Y SUV, its bestseller. This reduction will make more versions of the Model Y eligible for a $7,500 electric vehicle tax credit that will be available through March. Tesla also slashed the base price of the Model 3, its least expensive model, by about 6%.

Far from pleasing investors, the steep price declines sent Tesla shares down nearly 3% in midday trading on Friday. Since the start of last year, the stock has fallen more than 65%. Many investors fear Tesla’s sales slowdown will persist and worry about CEO Elon Musk’s erratic behavior and the distractions caused by his $44 billion purchase of Twitter.

“I think the real driver of all of this is the declining demand for Teslas,” said Guidehouse Research e-Mobility analyst Sam Abuelsamid.

Itay Michaeli, an industry analyst at Citi, wrote in a note to investors that Tesla appears to be prioritizing sales volume over price — a strategy that could squeeze its profit margins, at least in the short term.

Messages were left Friday asking for a comment from Tesla.

In the meantime, Tesla faces the threat of increased competition from other automakers in the United States and around the world for years to come. Last year in the United States, total sales of electric vehicles soared nearly 65% ​​compared to 2021. Automakers sold 47 models of electric vehicles; only four were Teslas. S&P Global Mobility expects the number of electric vehicle models to grow to 159 by 2025.

And as overall electric vehicle sales increase, Tesla’s market share in the United States is shrinking. From 2018 to 2020, Tesla accounted for around 80% of the electric vehicle market. By 2021, that figure had fallen to 71%, and it continues to fall, according to registration data collected by S&P.

Still, Tesla’s U.S. sales rose 40% last year, and S&P expects them to continue rising as overall electric vehicle sales rise steadily.

Even with US tax credits, electric vehicles remain expensive compared to gas-powered vehicles, largely due to the high cost of batteries. Additionally, higher lending rates and more expensive raw materials are keeping costs high for buyers and could limit electric vehicle sales, for Tesla as well as for its competitors.

With Tesla’s price cuts on Friday, its Model Y Performance model, once priced at nearly $70,000, now starts at just under $57,000. The starting price of the Model 3, Tesla’s least expensive vehicle, has been reduced to just under $44,000 from $47,000.

The company’s decision to lower the base price of the Model 3, which was already eligible for the federal tax credit, is a clear sign that demand has weakened, Abuelsamid noted.

Tesla added two huge factories in Austin, Texas, and Berlin that are operating at only a fraction of their production capacity, “which is undoubtedly costing them a lot of money,” Abuelsamid said.

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