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Tesla extends price cuts to US and Europe to boost demand

Tesla extends price cuts to US and Europe to boost demand

Tesla extends price cuts to US and Europe to boost demand

  • Tesla is slashing prices in the US and Europe by up to 20%
  • Fixed cost inflation is the speaker behind German cuts
  • Stocks fell in US premarket trading
  • The move follows last week’s decline in prices in Asia
  • Some models now qualify for US loans, French subsidies

January 13 (Reuters) – Tesla (TSLA.O) Expanded its aggressive discounting strategy, slashing prices of electric vehicles by up to 20% in the US and Europe. There are no Wall Street estimates for 2022 deliveries.

The move, which sent Tesla shares down 4.5% in US premarket trading, followed a warning from CEO Elon Musk. the prospect of a recession and implied that higher interest rates could lower prices to support volume growth at the expense of profits.

As low prices in Tesla’s key markets pushed orders for new cars outstripping supply, the automaker abandoned its strategy for 2021 and 2022. Musk recognized last year those prices were “embarrassingly high” and could hurt demand.

There was also persistent cost inflation factor is cutting prices, a Tesla German spokesman said, confirming the price cut in its upper European market.

Reuters calculations showed that price cuts posted in the U.S. on Thursday for its global bestsellers, the Model 3 sedan and Model Y crossover SUV, were between 6% and 20%.

Its base Model Y now costs $52,990, up from $65,990.

That’s ahead of a federal tax credit of up to $7,500 that took effect in early January for many electric vehicle models.

Below is a table of price drops for models in Germany and the United States:

Reuters graphic Reuters graphic

Tesla also cut the prices of its Model X luxury crossover and Model S sedan in the United States.

In Germany, it slashed the price of the Model 3 and Model Y by about 1% to 17%, depending on the configuration. Also reduced prices in Austria, Switzerland and France.

Combined with the US subsidy, the price of the new Tesla is a 31% discount for an American buyer of a long-term Model Y. In addition, Tesla’s move expanded the range of vehicles eligible for the Biden administration’s tax credit.

Before the price cut, the five-seat version of the Model Y was ineligible for that credit, which Musk called “spoiled.” Once the price drops, the long-term version of the Model Y will be valid.

The reductions could make EVs more affordable for people priced out of the market.

In France, customers who bought a Model 3 for €44,990 (US$48,773) will now get a further price reduction thanks to a €5,000 government subsidy. The cap for the EV scheme is 47,000.

VOLUME AGAINST DRIVES

A new Tesla Model 3 is displayed at a delivery center on the last day of the company’s third quarter in San Diego, California, on September 30, 2019. REUTERS/Mike Blake

“It really should increase volume in 2023 (Tesla),” said Gary Black, a Tesla investor who remained bullish on the company and its future through the recent, sharp decline in the share price. “It’s the right move.”

Stocks were still lower in US pre-market trading as investors worried the move would erode bumper margins, especially as competition intensified.

“Tesla is highly valued because it’s still eye-watering when it comes to the number of cars it actually sells. But at the end of the day, there are all the other providers that sell a lot more cars overall,” said CEO Michael Hewson. . CMC Markets is a market analyst in the UK.

Some users on an online Tesla fan forum have complained about the price drop to recent car buyers, which lowers their second-hand value.

“Putting down €10,000 will definitely make you feel like you paid too much,” wrote one user on the Tesla Drivers & Friends forum.

In China, where Tesla cut prices by 6-13.5% last week, The owners protested claim compensation at delivery centers.

Prior to the cutbacks, Tesla’s U.S. inventory was trending higher, as tracked by models its website shows are immediately available. Prices are included used Tesla models are also downincreasing pressure to regulate the prices of new vehicles.

In 2021, the United States and China together will account for about 75% of Tesla’s sales, although it has boosted sales in Europe, where it is ramping up production at its Berlin plant.

Reuters graphic

SALES LEADERSHIP

Tesla lowered the price in China and other Asian markets Last week, Tom Zhu, the top executive in China and Asia, made his first major move since being appointed to oversee US production and sales.

Analysts said lower Chinese prices would boost demand and put pressure on rivals there, including BYD. (002594.SZ)following what could turn into a price war in the largest single market for electric cars.

Last month, the Tesla Model 3 became the best-selling electric car in Germany, followed by the Model Y, which surpassed Volkswagen. (VOWG_p.DE) full electrical ID.4. Volkswagen recently raised the price of its entry-level ID.3, bringing it in line with the now-lightweight Model 3.

Tesla missed Wall Street estimates for fourth-quarter deliveries. Full-year growth in shipments was 40%, falling short of Musk’s 50% forecast.

Tesla shares under pressure

($1 = 0.9224 euros)

Reporting by Zhang Yang in Shanghai, Hyunjoo Jin in Seoul, Victoria Valdersee in Berlin; Additional reporting by Bansari Mayur Kamdar in Bangalore; Writing by Kevin Krolicki in Singapore and Josephine Mason in London; Edited by Lincoln Feast, Kenneth Maxwell, Mark Potter, and Alexander Smith

Our standards are: Thomson Reuters Trust Principles.

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