The company, led by controversial entrepreneur Elon Musk, is taking action to reignite consumers’ buying desire — namely cutting prices. Last week, the company announced a price reduction in Asia, lowering prices in China by up to 13%.
China accounted for 24% of Tesla’s total revenue over the first nine months of 2022. The company’s deliveries of its cars made in China, including sales in that country and exports, dropped by almost 50% in December from November.
And now Tesla has announced price decreases in the U.S., Europe, the Mideast and Africa. The cuts put prices for Tesla’s biggest sellers below $55,000, which is the cap for a $7,500 U.S. government tax credit.
Tesla Slashes Prices by Up to 20% in U.S.
The high-performance Model Y crossover will see a price cut of almost 20% to $52,990, before fees. Tesla’s high-performance version of its Model 3 sedan will now costs $53,990, down 14%. The company reduced prices for its other models too. Tesla accounted for 65% of U.S. electric vehicle sales last year.
In Germany, Tesla has sliced prices by 1% to almost 17% for the Model 3 and the Model Y.
Tesla delivered about 1.31 million vehicles last year, up 40% from 2021. But the company’s goal was a 50% increase. Musk has blamed the Federal Reserve’s interest-rate hikes for the shortfall.
But other problems weighed on the company too. That includes increased competition from big competitors such as Ford and production issues at Tesla’s Shanghai factory.
Musk’s preoccupation with his newly-purchased Twitter hasn’t helped matters. And his repeated expressions of support for conservative politicians may alienate potential buyers whose politics are left of center.
Analysts’ Voice Mixed Reactions to Tesla’s Move
Analyst reactions to the price cuts were mixed. Wedbush’s Dan Ives, a Tesla bull, was sanguine.
“While this clearly will have a negative impact on margins, we believe this was the right move at the right time to spur further EV [electric vehicle] demand,” he wrote on Twitter. He noted the positive impact for the tax benefit.
“The initial knee-jerk Street reaction to Tesla’s big price cuts will be negative, and the stock could be weak.” Ives said
“However, seeing the forest through the trees, Musk & Co. have more global scale today than ever before. And it’s time to flex muscles and cut prices now in the EV arms race.”
Ives’ prognosis of the stock price was certainly correct. Tesla shares fell 3% early Jan. 13 from the Jan. 12 close. Whether his longer-term prognosis turns out to be correct is up in the air.