Tesla cuts prices by up to a fifth to boost demand

Shares in Tesla tumbled nearly 4% Friday morning in the wake of a new round of U.S. price cuts and the Chinese government’s refusal to allow Tesla to expand its Shanghai Gigafactory.

Tesla Model3_16

Tesla Model Y is the company’s most-popular model.

One of Wall Street’s growing concerns is that the price cuts come in response to consumers’ weakening appetite for the automaker’s vehicles. The new price reductions came a week after Tesla slashed prices by as much as 13% in China after December’s slumping sales of its Shanghai-built vehicles.

Now, even cheaper

The company slashed the price of its base Model Y crossover to $52,990, a nearly 20% price cut. The move certainly should help maintain sales volume, as it enables customers to qualify for federal tax incentives, which apply to electric vehicles costing less than $55,000. Tesla also slashed the price 14% of the high-performance variant of its Model 3 sedan to $53,990, also allowing its buyers to benefit from the tax incentive.


Tesla also cut prices in Europe. In Germany, where the Model 3 was the best-selling EV last month, Model 3 and Model Y prices have been reduced by as much as 17 percent. In the United Kingdom, the price of a Model Y dropped to £44,990 pounds from £51,990 pounds. In Italy, prices have fallen by as much as 22%, while in France, the Model 3 now sells for €44,990, well below the government’s €47,000 price cap for incentives, which reduced its price by €5,000.

And although Tesla demand is growing in Europe, the U.S. and China account for 75% of Tesla’s sales.

Maintaining market share

The cuts come as more electric vehicles are coming to the U.S. market from other automakers, all of which have newer models and fresher designs than Tesla. The price cuts could be an acknowledgement Tesla plans to fight to maintain its shrinking market share in effort to remain the world’s top EV seller.

Tesla accounted for 65% of EV sales in the U.S. market last year, with EVs commanding 5.8% of the overall market. But Tesla’s share in 2022 was down from its 2021 share of 72%, proof that EV newcomers are having some impact.


As elsewhere, both the Model 3 and Model Y are Tesla’s:

bestsellers stateside, and the company’s highest volume vehicles. Tesla sold 491,000 vehicles in the U.S. in 2022, according to Automotive News, up 30.5% from the 340,800 units sold in 2021. The Model Y was the brand’s most-popular vehicle, selling 231,400 units, followed by the Model 3 at 198,200, the Model S at 37,300 and the Model X at 24,100.

And despite what you might think, competitors have a long way to go to match Tesla’s numbers.

Ford Motor Co. was the second-largest seller of EVs in the U.S. last year, commanding 7.6% of the U.S. EV market in 2022, followed by Hyundai Motor Group at 7.1 percent. But the jockeying for market share will continue, as the world’s automakers all see EVs as the industry’s major growth opportunity.

Trouble in China

But Wall Street is also clearly concerned about Tesla’s Chinese market share.


According to a Bloomberg News report, a planned expansion of Tesla’s plant in Shanghai, which builds the Model Y and Model 3, is being delayed as central government officials are troubled by the sizeable presence in Asia’s largest economy of a U.S. corporation with ties to Elon Musk’s Space Exploration Technologies Corp., which has been launching Starlink satellites since 2019.

Starlink technology, which would enable users to get through China’s Great Firewall, isn’t present in Tesla automobiles. But Beijing is increasingly anxious about data security and social stability.

The plant can build up to 1 million units annually, and manufactured more than 710,000 units last year, accounting for 52% of the company’s annual production.

But Tesla is finding the road to success blocked more and more often at a time when tensions are running high between Washington and Beijing. Tesla cars have been banned from Chinese military complexes and housing compounds since 2021 as the cars’ built-in cameras are suspected of recording sensitive data. And Tesla’s price cuts led angry owners who missed out to swarm showrooms last weekend.

But Tesla is expanding elsewhere in Asia, with plans to open showrooms in Thailand and build a new factory in Indonesia.

Note: This article is taken from thedetroitbureau.com




Add a Comment

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