January 28, 2023

Raven Tribune

Complete News World

Tesla is cutting prices sharply as it moves to increase demand

Tesla has slashed the prices of most of its electric cars in the United States and Europe by up to 20 percent in a bid to stimulate sluggish demand.

The automaker faces increasingly stiff competition in the global market for electric vehicles. It also has to deal with rising interest rates in the United States, which have made it more expensive to finance car purchases.

“It’s no secret that demand for Tesla is starting to see some cracks in this global slowdown,” Wedbush analyst Dan Ives said Friday in a report released after the price cuts were announced.

For some lower-priced Tesla models, the cuts put them within range to qualify for the $7,500 in federal tax credits that were made available as of January 1 under the Inflation Control Act. The credit is available for electric vehicles under $55,000.

Tesla has enjoyed steady and rapid growth over the past decade, but it now has to grapple with a variety of challenges, including concerns that its CEO, Elon Musk, is too busy with Twitter, the social media platform. I acquired it last year for $44 billion.

Mr. Musk sold billions of dollars in Tesla shares to fund the Twitter takeover, which sent Tesla’s share price down, and he was criticized for firing a large portion of Twitter’s staff. He also aired polarized political views on the social media platform — including several messages that appeared to support Russia in its war against Ukraine — which damaged his reputation and that of Tesla with some consumers.

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Tesla isn’t alone in dealing with slowing sales. US auto sales fell About 8 percent last year to fewer than 14 million cars and trucks, the lowest level since 2011, mainly because computer chip shortages have kept manufacturers from producing many of the cars consumers want to buy.

However, electric vehicle sales rose 66 percent to more than 808,619, according to Kelly Blue Book, a market researcher. And while Tesla continues to dominate this segment, many automakers are gaining ground. Ford, Volkswagen, and several other automakers reported significant increases in electric vehicle sales last year, offering several models that were more affordable than Tesla’s. Together, Hyundai and subsidiary Kia sold more than 43,000 electric vehicles in the United States in 2022, up from just a few hundred in 2021.

New competitors are on the way, too. Later this year, GM is supposed to start making electric versions of its Chevrolet Silverado pickups, Chevrolet Blazer and Equinox.

Tesla was too problem in China, its largest market, where local manufacturer BYD is now the No. 1 electric vehicle brand. Tesla recently cut prices in China and reported a Total global sales for 2022 This was lower than analysts’ expectations.

While Tesla is still hailed for the advanced technologies it packs into its cars and its sleek design, it has been slow to add to its model line. It currently offers just four cars, and two of the luxury models are out of reach for most average consumers. It last introduced a new car in 2020, when the Model Y went into production.

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Since 2019, Tesla has promised to introduce a pickup truck called the Cybertruck, but has delayed its production several times. The company now hopes to start making them later this year. It has an angular, futuristic design and is expected to be sold as a luxury car, which may limit its appeal.

In December, Tesla began delivering a small number of battery-powered semi-trucks to PepsiCo, its first customer.

In lowering the prices of its current models, Tesla indicates that it is willing to give up some profits in order to increase sales volume. The company typically shows gross profit margins of 26 percent — more than double that of some rival automakers.

After the price cuts were announced, Tesla stock fell more than 2 percent on Friday. The share price is down about 70 percent since November 2021.

The latest price cut for Tesla cars appeared on the company’s website late Thursday. The automaker now shows the Model 3 high-performance compact selling in the U.S. for less than $54,000, down from $63,000, a 14 percent drop.

The more expensive version of the Model 3 now sells for less than $44,000, a reduction of about $3,000, or 6 percent. The Model Y now starts at $53,000, a 20 percent reduction from the previous price of $66,000.

Tesla sold 1.3 million cars in 2022, up 40 percent from the previous year, but below the 50 percent annual growth target the automaker has set for itself. In recent months, rising borrowing rates have made its electric cars more expensive for the people who borrow.

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Tesla’s fourth-quarter production of 440,000 vehicles was 34,000 more than the company’s, indicating that the recession has outgrown supply chain problems and production issues.