Tesla slashes prices in US, Europe to spur demand

  • Tesla cuts prices in the US, Europe by up to 20%
  • The move follows price cuts across Asia last week
  • Some models are now eligible for the US tax credit
  • The Model 3 price in Germany is in line with Volkswagen’s ID.3

Jan 13 (Reuters) – Tesla (TSLA.O) slashed prices of its electric vehicles in the United States and Europe by up to 20%, part of an aggressive discounting strategy after missing Wall Street estimates for 2022 deliveries. have expanded.

The move, which prompted 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 would have to adjust vehicle pricing to maintain volume growth at the expense of profit. can reduce.

The low pricing in Tesla’s key markets is a sharp contrast to the strategy the automaker adopted during 2021 and 2022 when there is an excess of supply for new vehicles. Musk acknowledged last year that prices had become “embarrassingly high” and could hurt demand.

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

That’s before a federal tax credit of up to $7,500 that went into effect in early January for many electric vehicle models.

The following is a table of price cuts by model in Germany and the United States:

Reuters Graphics

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

In Germany, it cut prices for the Model 3 and Model Y — its global top-sellers — by between about 1% and about 17%, depending on configuration. It also cut prices in Austria, Switzerland and France.

For the US buyer of the long-range Model Y, the new Tesla price combined with US subsidies equates to a 31% discount. In addition, Tesla’s move widens the vehicles in its line-up for Biden administration tax credits.

Prior to the price cut, the five-seat version of the Model Y was ineligible for credit for what Musk called a “glitch”. After the price cut, the long-range version of the Model Y would qualify for a $7,500 federal credit.

“This should really boost 2023 (Tesla) volume,” Gary Black, a Tesla investor who has been bullish on the company and its prospects through the recent sharp share price decline, said in a tweet. “It’s the right move.”

Still, some users online on Tesla fan forums complained the price cut deprived customers who recently bought their vehicle, leaving them with a less valuable item in the second-hand car market.

“I’m not too happy with such hefty prices. Putting 10,000 euros down like that definitely makes you feel like you just paid too much,” one user wrote on the ‘Tesla Drivers & Friends’ forum on Friday. “

In China, where Tesla last week cut prices by 6-13.5%, owners protested at distribution centers across the country, pressing Tesla for compensation.

Prior to the price cut, Tesla inventory in the United States, as tracked by the model as immediately available, as its website shows, was trending higher. Prices for used Tesla models were also declining, putting pressure on it to adjust new car sticker prices.

For 2021, the United States and China combined would account for about 75% of Tesla’s sales, although the automaker is boosting sales in Europe, where its Berlin factory is ramping up production.

Reuters Graphics

new sales lead

This is the first major move by Tesla since appointing Tom Zhu, its chief executive for China and Asia, to oversee US output and sales.

Tesla last week cut prices in China and other Asian markets. The Chinese price for a Model 3 or Model Y was down 13% to 24% from September after the recent move, with previous price cuts announced in October and more recent incentives, Reuters calculations showed.

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

Analysts had said the Chinese price cut would spur demand and pressure its rivals there, including BYD (002594.SZ), in what could become a price war in the biggest single market for electric vehicles.

That pressure can build up in Europe as well.

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

Tesla missed Wall Street estimates for deliveries in the fourth quarter. Full-year growth in deliveries was 40%—less than Musk’s own forecast of 50%.

Tesla stock is under pressure

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

Our Standards: The Thomson Reuters Trust Principles.

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