Tesla slashes prices in U.S., Europe to drive demand

  • Tesla cuts prices in US, Europe up to 20%
  • Move to follow price reductions in Asia over the past week
  • Some models are now eligible for US credit
  • Model 3 costs in Germany in line with Volkswagen ID.3

Jan 13 (Reuters) – Tesla ( TSLA.O ) has cut prices on its electric cars in the United States and Europe by up to 20%, extending a strategy of price cuts after missing Wall Street estimates for the 2022 delivery.

The move, which led to a 3.8% drop in Tesla shares in Frankfurt, came after CEO Elon Musk warned that the prospect of a recession and higher interest rates meant it can reduce the price of cars to maintain the growth of the amount in the cost of profit.

The lower price on Tesla’s major markets has marked a change from the strategy pursued by the car company in most of 2021 and 2022 when the supply of orders for new cars was greater. Musk acknowledged last year that prices were “too high” and could hurt demand.

The US price cuts, announced late Thursday US time on the Model 3 sedan and Model Y crossover SUV, are between 6% and 20% compared to prices before the reduction, according to Reuters calculations.

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That was before the $7,500 federal tax credit was announced for most electric vehicles in early January.

The following is a table of cost reductions by example in Germany and the United States:

Reuters Graphics

Tesla also cut prices for its Model X luxury crossover SUV and Model S sedan in the United States.

In Germany, prices were reduced on Model 3 and Model Y – its best sellers worldwide – between 1% and almost 17% depending on the schedule. Prices also decreased in Austria, Switzerland and France.

For a US buyer of the long-term Model Y, the new Tesla price combined with the US subsidy that was used this month reaches a discount of 31%. In addition, Tesla’s move expanded the cars in its line to be eligible for the tax credit of the Biden administration.

Before the price drop, the five-seat model of the Model Y was ineligible for that credit, a name Musk called “disturbing”. After depreciation, a long-term Model Y will qualify for a $7,500 federal credit.

“This should really boost the 2023 (Tesla) volumes,” said Gary Black, a Tesla investor who has remained bullish on the company and its prospects by reducing share prices since now, he said in a tweet. “It’s the right move.”

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However, some users on online Tesla fan forums have criticized the price reductions of customers who have recently purchased their cars, putting them at a lower price on the car market.

“I don’t really like these high prices. Just drop 10,000 euros like that – you will definitely feel that you just paid too much,” wrote one user on ‘Tesla Drivers and Friends ‘ forum on Friday.

In China, where Tesla cut prices last week by 6-13.5%, the owners of the country’s delivery centers protested and pressed Tesla for compensation.

Before the price drop, Tesla inventory in the United States, as checked by the examples shown by its website at the same time as it is available, has grown significantly. Prices on used Tesla models also fell, putting pressure on new car prices.

For 2021, the United States and China together accounted for about 75% of Tesla sales, although sales of the car are increasing in Europe, where the production of its Berlin factory is increasing.

Reuters Graphics


The change is Tesla’s first major move since appointing its chairman for China and Asia, Tom Zhu, to oversee US operations and sales.

Tesla cut prices in China and other Asian markets last week. With the first price reduction announced in October and the recent stimulus, the Chinese price for a Model 3 or Model Y dropped 13% to 24% from September after the latest move , showed Reuters calculations.

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Tesla has also cut prices in South Korea, Japan, Australia and Singapore.

Analysts said China’s price cuts would increase demand and put more pressure on its rivals there, including BYD (002594.SZ), to follow what could be prices. price in the largest single market for electric vehicles.

That pressure can also be built in Europe.

Tesla’s Model 3 was the best-selling electric car in Germany last month, followed by the Model Y, beating Volkswagen’s ( VOWG_p.DE ) ID all-electric.4. Volkswagen recently raised the price of its entry level ID.3, putting it on par with the now discounted Model 3.

Tesla missed Wall Street estimates for fourth-quarter earnings. Full-year growth in deliveries is 40% – well above Musk’s forecast of 50%.

Tesla shares under pressure

Reporting by Zhang Yan in Shanghai, Hyunjoo Jin in Seoul, Victoria Waldersee in Berlin; Written by Kevin Krolicki in Singapore; Edited by Lincoln Feast, Kenneth Maxwell, Mark Potter and Alexander Smith

Our Principles: The Thomson Reuters Trust Principles.


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