Tesla’s price cuts are causing disruption in the US auto industry

American electric car maker Tesla has slashed the prices of its entire Model S3XY range in the US, with some car variants receiving discounts of up to 20% off their previous prices. The strategy has had a ripple effect in the auto industry, putting pressure on competitors in the EV sector.

Tesla’s price cuts received mixed reactions among investors and Wall Street analysts, with some arguing the move was a response to falling demand. On the other hand, others have pointed out that Tesla’s low prices are a strategy that could put pressure on competitors, especially since popular variants of the cars like the Model 3 and Model Y are now eligible for a $7,500 federal tax credit.

Analysts noted that it is clear that Tesla’s price cuts have resulted in the EV maker undercutting competition in the rest of the electric vehicle sector. Low car prices have also had a negative impact on the value of used Teslas, with some dealers reporting that their Tesla inventory has lost several thousand dollars overnight. The Wall Street Journal.

Bank of America analyst John Murphy noted that traditional automakers, especially those without Tesla’s scale in electric vehicles, are currently struggling with profit margins or losing money on their respective plug-in offerings. With that in mind, Tesla’s recent price cuts could lead to additional cost-cutting efforts by rival automakers, or even potentially lead to a price war in the EV segment.

“These price cuts will likely make business more difficult as they try to ramp up production of EV offerings,” Murphy said.

A number of veteran automakers have responded somewhat to Tesla’s price cuts. A spokesman for General Motors noted that the veteran automaker is following Tesla’s strategy, but the lower prices of the S3XY series have not had any significant impact on GM. “This underscores the value of having a broad portfolio of EVs at multiple price points, which is what we’ve been developing,” a GM spokesperson noted.

A Ford spokesperson noted that the veteran automaker achieved record sales for the Mustang Mach-E all-electric crossover last year. The spokesperson also noted that demand for the EV lineup, which includes the F-150 Lightning, has been strong, so Ford is closely monitoring the electric vehicle market to maintain its competitive advantage.

Data from research firm Motor Intelligence shows that Tesla will account for about 65% of total electric car sales in the US in 2022. That’s well ahead of Ford’s 7.6% and General Motors’ 3.5%. Nevertheless, both GM CEO Mary Barra and Ford CEO Jim Farley have set their sights on surpassing Tesla as the top-selling EV in the country at some point in the future.

Tesla’s price cuts, if anything, appear to have spurred interest in the company’s electric vehicles. whom EdmundsAfter the price cuts were announced, the number of people researching Tesla vehicles increased significantly. Edmunds In the week ending Jan. 15, the Model Y was the second most-researched car on its website, a big improvement from its spot as the 70th most-researched car the week before. Tenet, a financial services firm for EV buyers, also observed that applications for Tesla financing tripled after the S3XY group’s US price cuts were implemented.

Feel free to contact us with news tips. Just send a message simon@teslarati.com give us a head.

Tesla price cuts cause disruption in US auto industry: report

Source link