- Tesla cuts prices in the US and Europe by up to 20%
- The move follows price cuts across Asia last week
- Some models are now eligible for US tax credits
- Model 3 price in Germany in line with Volkswagen ID 3
Jan 13 (Reuters) – Tesla (TSLA.O) It slashed the prices of its electric cars in the US and Europe by up to 20%, extending its deep discount strategy after it missed Wall Street estimates for 2022 delivery.
The move, which led to a 3.8% drop in Tesla shares in Frankfurt, came after CEO Elon Musk warned that a possible recession and rising interest rates meant it could cut car prices to sustain volume growth at the expense of profits.
The price decline across Tesla’s key markets is a reversal of the strategy the automaker has pursued through most of 2021 and 2022 when orders for new vehicles outpaced supply. Musk admitted last year that prices had become “embarrassingly high” and could hurt demand.
The US price cuts, announced late Thursday US time on the Model 3 sedan and Model Y crossover, ranged between 6% and 20% over pre-rebate prices, according to Reuters calculations.
That’s before up to the $7,500 federal tax credit that went into effect for several electric vehicle models at the beginning of January.
Below is a table of price reductions by model in Germany and the United States:
Tesla also lowered the 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 best sellers – by between 1% and approximately 17% depending on the configuration. Prices have also been reduced in Austria, Switzerland and France.
For a US buyer of the long-running Model Y, Tesla’s new price combined with the US subsidy that went into effect this month represents a 31% discount. Additionally, Tesla’s move expanded the vehicles in its lineup that qualify for a Biden administration tax credit.
Prior to the price cut, the five-seat version of the Model Y was ineligible for this credit, which Musk called “tampering.” After the price cut, the long-running version of the Model Y will qualify for a $7,500 federal credit.
“This should really drive Tesla volumes for 2023,” Gary Black, a Tesla investor who has remained bullish about the company and its prospects through a recent sharp drop in share prices, said in a tweet. “It’s the right move.”
However, some users on online Tesla fan forums have complained about price cuts for disadvantaged customers who have recently purchased their car, leaving them with a low-value item in the used car market.
“Not very happy with these huge price fluctuations. Just a €10,000 cut like that – it definitely makes you feel like you paid way too much,” a user wrote on the Tesla Drivers and Friends forum on Friday.
In China, where Tesla cut prices last week by 6-13.5%, owners have protested at delivery centers across the country, pressing Tesla for compensation.
Prior to the price cut, Tesla stock in the US, according to models whose website shows them available immediately, was trending higher. The prices of used Tesla models have also fallen, increasing pressure on them to adjust sticker prices for new cars.
For 2021, the US and China together accounted for about 75% of Tesla’s sales, even though the automaker has been growing sales in Europe, as its Berlin plant has been ramping up production.
New sales leadership
The shift is Tesla’s first major move since hiring Chief Executive Officer Tom Chu for China and Asia to oversee production and sales in the United States.
Tesla cut prices in China and other Asian markets last week. Combined with previous price cuts announced in October and recent incentives, the Chinese price of the Model 3 or Model Y fell 13% to 24% from September after the latest move, Reuters calculations show.
Tesla also cut prices in South Korea, Japan, Australia and Singapore.
Analysts said China’s price cuts will boost demand and put more pressure on its competitors there, including BYD (002594.SZ)to follow suit in what could become a price war in the largest single market for electric vehicles.
This pressure could build in Europe as well.
Tesla’s Model 3 was the best-selling electric car in Germany last month, followed by the Model Y, besting Volkswagen’s. (VOWG_p.DE) ID.4 fully electric. Volkswagen recently raised the price of its entry-level ID 3, putting it on par with the now-discounted Model 3.
Tesla missed Wall Street’s estimates for fourth-quarter deliveries. Growth in deliveries for the full year was 40% — also below Musk’s own forecast of 50%.
Additional reporting by Zhang Yan in Shanghai, Hyunju-jin in Seoul, and Victoria Waldersee in Berlin; Written by Kevin Krolicki in Singapore; Editing by Lincoln Feast, Kenneth Maxwell, Mark Potter and Alexander Smith
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