Tesla may be a relative newcomer compared to legacy companies like GM and Ford, but it has adopted an old tactic in the industry: price wars.
The automaker has lowered the sticker price on its cars in the United States and China several times since last fall. Any speculation that the cuts would stop in 2023 ended in January when Tesla drastically cut prices by as much as 20%.
Now, the company is lowering prices again. Tesla lowered the price of the high-end and aging Model S and Model X by $5,000 each, according to its website. base model S, two-wheel drive all-wheel drive, Now $84,990. The Model X is $94,990.
The Model 3 sedan and Model Y are also $1,000 and $2,000 less, respectively.
Tesla lowered prices in the US due to tightening requirements to qualify for a $7,500 federal tax credit. Tesla said that based on new IRS guidelines, the $7,500 credit for a rear-wheel drive Model 3 on April 18 will be reduced to $3,750.
While lowering prices may boost sales, it does come at a cost. Tesla enjoyed one of the highest auto margins in the segment. Selling its cars at lower prices may reduce that profit margin unless it cuts costs elsewhere. Price cuts cannot last forever.
The price-cutting trend started in October when Tesla announced price cuts in China of up to 9% on the Model 3 and Model Y. And already this year, the price of the base Model Y is 20% lower than it was at the end of 2022. .
The price cuts have continued as Tesla looks to expand its operations and produce 1.8 million vehicles in 2023. CEO Elon Musk said during the company’s fourth-quarter and full-year earnings call in January that the company has “the potential to manufacture two million vehicles this year.”
Tesla said Sunday it delivered 422,875 electric cars in the first quarter of 2023, beating Wall Street estimates by nearly 420,000 units. The company produced 440,808 vehicles in the same period. In the fourth quarter of 2022, Tesla delivered 405,278 and produced 439,701 units. These fourth-quarter deliveries were also record results, but they missed Wall Street’s expectations.