Tesla Inc. has slashed the prices of several versions of its electric vehicles due to low sales and plummeting stock. This would mean that some of its models are eligible for a new federal tax credit that could invigorate buyers’ interest.
The price of some versions of the Model Y SUV, one of its top sellers, was slashed by nearly 20% in the United States. This cut will make more versions of the Model Y eligible for a $7,500 electric-vehicle tax credit that will be available in March. The company also slashed the price of the Model 3 by almost 6%.
From the beginning of last year, the stock has crashed by more than 65%. Investors are worried that this downturn may continue and are concerned by the behaviour of CEO Elon Musk.
“I think the real driver for all of this is falling demand for Teslas,” said Guidehouse Research e-Mobility analyst Sam Abuelsamid.
Itay Michaeli, an industry analyst at Citi, wrote in a note to investors that, apparently, Tesla is prioritizing sales volume over price.
Tesla now faces intense competition from other companies in the US and globally for years to come. Automakers sold 47 electric vehicle models; only four were Teslas.
However, U.S. sales for Tesla rose by 40% last year, and S&P expects them to continue to rise as overall electric vehicle sales steadily increase.
With the price cut, Tesla’s Model Y Performance model which was priced at almost $70,000 is now $57,000. The starting price of the Model 3, Tesla’s lowest-priced vehicle, which was $47,000 is now under $44,000.
Abuelsamid noted that the company’s decision to drop the base price of the Model 3, which had already been eligible for the federal tax credit, is a clear sign that demand had weakened.
Tesla built two new factories in Austin, Texas, and Berlin that are running at only a fraction of their output capacities, “which is undoubtedly costing them dearly,” Abuelsamid said.
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