- Tesla is slashing prices by up to 20% in the US and Europe
- Fixed-cost inflation behind German cuts – spokeswoman
- Stocks fall in premarket US trading
- The move follows price cuts across Asia last week
- Some models now qualify for US credits, French subsidies
Jan 13 (Reuters) – Tesla (TSLA.O) It has slashed prices of its electric vehicles by up to 20% in the US and Europe, extending a strategy of aggressive discounting after missing Wall Street estimates for 2022 deliveries.
The move, which triggered a 4.5% drop in Tesla’s shares in pre-market US trading, came after CEO Elon Musk warned that the prospect of a recession and higher interest rates would cut prices to sustain volume growth at the expense of profits.
The lower pricing in Tesla’s key markets marks a reversal from the automaker’s strategy for 2021 and 2022, when orders for new vehicles outpace supply. Musk acknowledged that prices were “uncomfortably high” last year and could hurt demand.
And steady price inflation was also a factor in lowering prices, with a Tesla Germany spokeswoman confirming price cuts in its top European market.
By late Thursday, U.S. price cuts on its global bestsellers, the Model 3 sedan and Model Y crossover SUV, ranged from 6% to 20%, Reuters calculations showed.
The base version of its Model Y is now priced at $52,990, up from $65,990 previously.
That was before a federal tax credit of up to $7,500 went into effect in early January for several electric vehicle models.
Below is a table of price cuts for models in Germany and the US:
Tesla has cut the prices of its Model X luxury crossover SUV and Model S sedan in the US.
In Germany, it cut prices for the Model 3 and Model Y by about 1% to nearly 17%, depending on configuration. It also lowered prices in Austria, Switzerland and France.
For a long-haul Model Y buyer, the new Tesla price is 31% off with the US subsidy. Additionally, Tesla’s move expanded its lineup of vehicles to qualify for the Biden administration’s tax credit.
Before the price cut, the five-seat version of the Model Y was ineligible for that credit, a designation Musk called “messed up.” After the price cut, the long-range version of the Model Y will be eligible.
These cuts will make EV cars affordable to people previously priced out of the market.
In France, customers buying the Model 3 for 44,990 euros ($48,773) will now get a further price cut through a government subsidy of 5,000 euros. 47,000 for the EV plan.
Volume VS edges
“It should really ramp up 2023 (Tesla) volumes,” Tesla investor Gary Black, buoyed by the recent, sharp stock price decline, said in a tweet. “It’s the right move.”
Shares were still lower in pre-market U.S. trading, with investors worried the move could erode bumper margins, especially as competition intensifies.
“Tesla is an outlier because there are still eye-watering estimates of the number of cars it actually sells. But at the end of the day there are all the other suppliers that sell the most cars overall,” says CEO Michael Hewson. Market analyst at UK CMC markets.
Some users on online Tesla fan forums have complained that the price cuts disadvantage those who recently bought their vehicles, leaving them with lower second-hand value.
“Putting down 10,000 euros like that – sure makes you feel like you paid too much,” wrote one user on the ‘Tesla Drivers and Friends’ forum.
In China, owners protested at delivery centers demanding compensation after Tesla cut prices by 6-13.5% last week.
Before the cuts, Tesla’s inventory in the U.S., tracked by models its website shows as readily available, was trending higher. Prices for used Tesla models also fell, increasing pressure to replace new car prices.
In 2021, the U.S. and China combined will account for 75% of Tesla sales, although it is increasing sales in Europe, where it is ramping up production at its Berlin plant.
Tesla last week cut prices in China and other Asian markets, its first major move being the appointment of Tom Zhu, its chief executive for China and Asia, to oversee U.S. manufacturing and sales.
Analysts said the Chinese price cuts would boost demand and put pressure on its rivals, including BYD. (002594.SZ)Following what could become a price war in the largest single market for electric vehicles.
Tesla’s Model 3 was the best-selling electric vehicle in Germany last month, followed by Volkswagen’s Model Y. (VOWG_p.DE) All electrical 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 fourth-quarter deliveries. Full-year growth in deliveries is 40% – well below Musk’s own forecast of 50%.
($1 = 0.9224 euros)
Reporting by Zhang Yan in Shanghai, Hyunjoo Jin in Seoul, Victoria Waltersee in Berlin; Additional reporting by Bansari Mayur Kamdar in Bangalore; By Kevin Grolicki in Singapore and Josephine Mason in London; Editing by Lincoln Feast, Kenneth Maxwell, Mark Potter and Alexander Smith
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