Tesla cuts prices in the US and Europe to stoke sales

Electric car maker Tesla is cutting prices in the United States and across Europe again, according to listings on the company’s website Thursday night in the US.

Tesla It did not respond to a request for comment on what prompted it to cut prices this week.

Still, the move in the US could help Tesla qualify for more federal tax credits for electric vehicles, and boost sales volumes here and abroad, after increased competition and interest rates.

In Europe, Tesla has lowered prices for its Model 3 and Model Y cars in Austria, France, Germany, the Netherlands, Norway, Switzerland and the United Kingdom.

Reuters reports that in Germany, Tesla has cut prices on the Model 3 and Model Y from 1% to around 17%, depending on the configuration. Tesla’s Model 3 was the best-selling electric car in Germany in December 2022, followed by the Model Y. Volkswagen and its famous electric car, the ID.4, in Germany.

The Tesla Model 3 at its discounted price is comparable to Volkswagen’s entry-level electric car, the ID.3.

According to independent researcher of the electric vehicle industry, TroyTeslike, the price of the new Tesla Model 3 in the US has fallen between 6% and 14%, depending on the configuration, and the cost of the Model Y has fallen by about 19%, also depending on the configuration.

The Model 3 is Tesla’s entry-level sedan. Some classify the Model Y as an SUV, others as a crossover. The company has also lowered the prices of its more affordable cars, the Model S sedan and the Model X falcon-winged SUV, in the United States.

In general, electric vehicles qualify for tax credits in the United States, depending on their form factor or class they fall into, their efficiency and range (meaning how many miles they can travel on a fully charged battery) as well as the manufacturers suggested retail price.

The US government has delayed new rules about sourcing raw materials and battery components to qualify automakers for the $7,500 Clean Car Tax Credit until at least the end of March 2023.

This means that Tesla — and other electric vehicle manufacturers — can buy critical parts and metal from suppliers around the world right now, and still be eligible for some subsidies for electric vehicles. Those seeking to qualify for federal benefits need to complete final assembly of their electric vehicles in North America under the current temporary rules.

Tesla’s latest round of rebates could set the company up for reaping the benefits of tax breaks for electric vehicles in the short and long term. But it also risks angering customers who have just agreed to take delivery of new electric cars from Tesla before the end of 2022 at higher prices.

Earlier this month, Tesla angered customers in China by lowering the prices of its Model 3 and Model Y cars there after many agreed to deliver at higher prices before December 31. Some customers have staged protests and demanded discounts, but so far, Tesla has not acquiesced, according to a Reuters report.

In late December, Tesla discounted its Model 3 and Y cars by about $7,500 to entice customers to deliver orders before the end of the fourth quarter. Tesla has also offered some US customers 10,000 miles worth of free charging (at Tesla Supercharging stations) if they agree to delivery before the end of the year.

Despite the discounts, in the fourth quarter of 2022, Tesla reported 405,278 vehicles delivered and 439,701 vehicles produced. The company was telling shareholders to expect 50% growth in annual vehicle delivery growth over a multi-year horizon, but it fell behind on that annual target and analyst expectations in the fourth quarter.

Tesla now operates the first automobile assembly plant in the United States in Fremont, California, its newest plant in Austin, Texas, its first overseas factory in Shanghai, and its newest plant in Gruenheide, Germany.

The company’s production capacity should be much higher in 2023 than it was in previous years with those plants, but downbeat analysts have expressed concerns about a possible “demand cliff.”

Bernstein analysts wrote in a note on Jan. 12 that Tesla now faces more competition, higher interest rates and slower consumer spending than in recent years.

They said, “We believe that many investors underestimate the magnitude of the demand challenges that Tesla faces.” However, the company was given an “underperforming” rating and a $150 price target on Tesla shares after the company’s share price declined in recent months.

CEO Elon Musk sold billions of dollars’ worth of his Tesla shares last year, in part to fund a backed $44 billion buyout of Twitter. Since taking over Twitter and naming himself CEO in late October, Musk has been splitting time, and sharing some resources, between the social media business and his electric car company.

Tesla plans to report its 2022 fourth-quarter results on January 25, 2023, and should share its new forecast for the coming year at that time.

Related Posts

Leave a Reply

Your email address will not be published. Required fields are marked *