HomeBusiness & FinanceTesla cuts prices globally by up to 20%

Tesla cuts prices globally by up to 20%

Tesla cuts prices globally by up to 20%

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

The company dropped prices nearly 20% in the United States on some versions of the Model Y SUV, its top seller. That cut will make more versions of the Model Y eligible for a $7,500 U.S. electric vehicle tax credit that will be available through March. It also reduced the base price of the Model 3, its least expensive model, by about 6%.

Far from pleasing investors, the sharp price cuts sent Tesla shares sinking about 4% in early trading Friday. Since the start of the year, the stock has plummeted more than 65%. Many investors fear that the sales slowdown will persist and have grown concerned about the erratic behavior of CEO Elon Musk and the distractions caused by his $44 billion purchase of Twitter.

Musk acknowledged last year that prices had become “embarrassingly high” and could hurt demand.

The lower pricing across the U.S., Europe, Middle East and Africa, following a series of cuts last week in Asia, marks a reversal from the strategy the automaker had pursued through much of 2021 and 2022 when new vehicle orders exceeded supply.

A reduction in cost inflation was also a factor in reducing prices in its top European market, a spokesperson for Tesla Germany said, without specifying which costs had fallen.

Shares fell as investors worried the move might erode bumper margins, particularly as competition intensifies, even if it boosts sales volumes.

Wedbush analyst Dan Ives said the move could boost global deliveries by 12-15% this year and shows Musk on the offensive.

“This is a clear shot across the bow at European automakers and US stalwarts (GM and Ford) that Tesla is not going to play nice in the sandbox with an EV price war now underway,” Ives said in a research note.

Tesla fans and customers complained the price cuts disadvantaged those who had recently bought a vehicle, leaving them with a lower second-hand value.

Greg Woodfill in Seattle, who bought a Model Y in December, had considered waiting until the new year to get the U.S. subsidy, but was lured by a discount at the time of $3,750.

“It’s a punch in the gut, to be honest,” he told Reuters on Friday, adding that it feels unfair Tesla sought to boost fourth quarter sales with discounts, only to cut prices a month later.

“If they knew they would drop the price this much, they should have just done it in December.”

In China, where Tesla cut prices last week by 6-13.5%, hundreds of Tesla owners gathered at the automaker’s showrooms and distribution centres in China last weekend, demanding rebates and credit after sudden price cuts they said meant they had overpaid for electric cars they bought earlier.

Part of the article was reported by Reuters.