Tesla’s big price cuts mean “big change in the EV market.”

Can Tesla remain the leader in the modern electric car market it has effectively created?

This question has been on the minds of EV buyers, investors, analysts, industry watchers and Elon Musk booths for months now. That’s especially so as questions about demand in China and the U.S. — Twitter drama aside — have overshadowed the electric carmaker’s success story.

On Thursday night, Tesla announced its answer to the problem, at least for now: steep price cuts across its lineup of cars, in some cases as much as 30 percent when the latest EV tax credits are applied.

Can Tesla remain the leader in the modern electric car market it has effectively created?

Plus, some of the price cuts now qualify cars for those tax breaks in the first place.

Analysts talking The Verge On Friday, he emphasized the importance of those cuts, saying they could have a profound impact not only on the Tesla brand, but also on the increasingly competitive EV game. Some said it could be the first shot in the coming EV “price war,” even as automakers struggle to source enough materials to put these cars on the road en masse.

“Tesla’s recent price cuts reflect a sea change in the EV market,” said Jessica Caldwell, executive director of insights at car-buying website Edmunds. “A wave of new EV options will hit the market in 2023, but given that production will be limited for most manufacturers, Tesla is positioned to entice consumers who don’t want to wait or are on the fence about EV technology. All buyers respond to one thing — a deal.” .

Potential Tesla customers will likely be very pleased with Thursday’s news. For example, the Model 3 Performance dropped from about $63,000 to $54,000 before any tax credits. The Model Y Performance dropped from about $70,000 to about $57,000, even before tax credits.

“Tesla’s Recent Price Cuts Reflect a Big Change in the EV Market”

“Of particular note are the changes for the Model Y, which has seen its MSRP drop by as much as $13,000 on some configurations, a stunning discount rarely seen in the industry,” said auto industry analyst Robby DeGraff. research firm AutoPacific. “Additionally, these more affordable prices mean that certain configurations of the Model 3 and Model Y, typically two of the best-selling electric vehicles in the country, should now be eligible for additional rebates of up to $7,500 thanks to revised federal EV tax credits. “

Tesla’s price cuts put the automaker’s offerings well below several rivals. The Model 3 Standard Range in particular is now closer than ever to the long-promised but never-materialized $35,000 Model 3.

The price cuts followed a similar move in China last week. There, Tesla cut its prices by 13 percent, the third such move in recent months as it battles with domestic automakers such as BYD for EV supremacy.

In the US, this move is also planned to coincide with changes to the EV tax credit under the Inflation Reduction Act. That legislation incentivizes tax credits for electric vehicles assembled in North America, as well as batteries assembled there.

Caldwell said the cuts, which are aimed at protecting Tesla’s market share, also represent its transition from a “market anomaly” to a mainstream car company. The average new EV price was around $65,000 at the end of 2022, which is higher than the astronomical new prices of internal combustion vehicles recently.

Tesla’s price cuts put the automaker’s offerings well below several rivals.

This is one way to stay ahead of the competition. Caldwell said that for a long time Tesla was virtually the only EV maker in the U.S. that didn’t make “compliant vehicles” — expensive, modified electric cars with a low range that meet local regulations. “But now Tesla has to be competitive in many areas, including price, design and performance,” he said.

This will become increasingly difficult in 2023. This year, every major automaker and several startups are planning a new EV offensive together, almost all with an impressive lineup of vehicles, advanced features, and an unprecedented level of software integration.

While Tesla’s lineup outstrips the competition in these areas, it’s aging; The Model S is 10 years old this year, and the best-selling Model 3 is 6 years old. Tesla appears to have several notable brand new products in the immediate pipeline, aside from the long-delayed Cybertruck and Roadster.

At the same time, as another Edmunds analyst said The Verge December sales are often a sign of less premium, more budget-friendly brands; Nissan in particular has struggled with the effects of this strategy for years.

“Tesla must be competitive in many areas, including price, design and performance.”

“Like major automakers, Tesla will have to grapple with what these price cuts will mean for its residual values ​​and brand image,” Caldwell said.

What’s more, many existing Tesla customers, including those who paid more for the same cars they bought in December, are reportedly unhappy with the move, fearing it will affect the resale value of their cars. On Friday, many took to social media, including Twitter, a platform Musk personally owns, to complain or ask for discounts on other services.

“However, there is some drama going on among buyers simply these exact Tesla cars were bought at higher prices, things could get ugly before these dramatic price cuts are announced, and Musk may have to find a way to put out those fires,” DeGraff said.

Meanwhile, Tesla owners in China took to the streets last weekend and this week to protest the price cuts, saying the decision had a negative impact on their sales prices. While customers in the U.S. and Europe are unlikely to go that far, one group of people was pretty happy with the decision: Tesla’s long-term investors.

“The initial reaction to these cuts will naturally be negative [Wall] First Street, we believe this is the right strategic poker move at the right time by Musk and company,” said Wedbush Securities technology analyst Dan Ives, who is bullish on Tesla but has been highly critical of Musk’s actions in recent months.

“Together, we believe these price cuts could increase global demand/supply by 12-15 percent in 2023, and suggest that Tesla and Musk are on the ‘attack’ to stimulate demand against a softening backdrop,” Ives said. “This is a clear blow to the European automakers and the US stalwarts (GM and Ford) that Tesla will not play well in the sandbox with the ongoing EV price war.”

As with most deals in life, there is at least one catch. While the new rules for EV tax credits are vague, evolving and sometimes deeply confusing, many observers have noted that the full benefit of these rebates — price cuts and tax credits combined — depends on Tesla delivering earlier. March 31. The rules regarding battery welding are set to change.

Unless something changes with the tax credits, and they likely will, these deals depend on Tesla’s ability to deliver cars to meet any demand that has arisen in the last 24 hours.

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