Tesla extends price cuts to US and Europe as sales surge

  • Tesla has cut prices in the US and Europe by up to 20%
  • The move follows outages across Asia last week
  • Some models are now eligible for US tax credits
  • Model 3 price in Germany according to Volkswagen ID.3

Jan 13 (Reuters) – Tesla ( TSLA.O ) cut the prices of its electric cars in the United States and Europe, the carmaker’s website showed, expanding a new strategy of aggressive discounting after missing Wall Street estimates for deliveries.

U.S. price cuts on the Model 3 sedan and Model Y crossover SUV announced late Thursday night, according to Reuters estimates, ranged from 6 percent to 20 percent over pre-reduction prices.

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

Below is a table of price reductions by model in Germany and the US:

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

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

For the US buyer of the long-range Model Y, combined with the US subsidy that goes into effect this month, the new Tesla price is a 31% discount. In addition, Tesla’s move expanded the range of vehicles eligible for the Biden administration’s tax credit.

Before the price cut, the five-seat version of the Model Y was ineligible for the credit, a designation that Tesla CEO Elon Musk called “confusing.” After the price cut, the long-range version of the Model Y will qualify for a $7,500 federal credit.

Along with price cuts announced last week in China and other Asian markets, the move marks a departure from Tesla’s strategy for much of 2022, when demand in its biggest markets was strong and average sales prices for its electric vehicles were on an upward trend.

“This should really increase 2023 (Tesla) volumes,” Tesla investor Gary Black tweeted about the company and its prospects amid the recent sharp stock price drop. “It’s the right thing to do.”

Still, some users on Tesla fan forums have complained that disadvantaged customers who have recently purchased their car have been priced out of a lower-priced item on the used car market.

On Friday, one user wrote on the “Tesla Drivers and Friends” forum: “I’m not too happy with these big price swings. Just a reduction of 10,000 euros – definitely makes you feel like you’re paying too much.”

In China, where Tesla cut prices by 6-13.5% last week, owners protested at delivery centers across the country, demanding compensation from Tesla.

Prior to the price cut, Tesla’s inventory in the US was trending higher, as tracked by models immediately available on its website. Prices for used Tesla models have also fallen, increasing pressure to adjust new car sticker prices.

Reuters graphics


The change is the first major move since Tesla appointed Tom Zhu, its top executive for China and Asia, to oversee production and sales in the United States.

Tesla last week cut prices in China and other Asian markets. Along with previous price cuts and recent incentives announced in October, the Chinese price for the Model 3 or Model Y has fallen by 13% to 24% since the latest move from September, Reuters estimates showed.

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

Analysts had argued that China’s price cuts would boost demand and put pressure on rivals there, including BYD ( 002594.SZ ), in what could turn into a price war in the largest single market for electric vehicles.

This pressure may intensify in Europe.

Tesla’s Model 3 was the best-selling electric car in Germany last month, with the Model Y coming in second, beating out Volkswagen’s ( VOWG_p.DE ) all-electric ID.4. Volkswagen recently raised the price of its entry-level ID.3 to bring it in line with the now-discounted Model 3.

Tesla missed Wall Street estimates for fourth-quarter deliveries. For the full year, shipments growth was 40% – less than Musk’s forecast of 50% growth.

Last month, Musk said that “radical interest rate changes” were changing the outlook for the industry and that Tesla could cut prices to keep up with volume growth, which would result in lower profits.

Tesla shares are under pressure

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

Our standards: Thomson Reuters Trust Principles.

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