- Tesla today announced big price cuts for its U.S. vehicles, with the biggest drop coming at the base Model Y. The entry-level EV is $13,000 less today than it was yesterday (a 20 percent drop), and it should now also qualify for a $7,500 federal tax credit.
- Tesla also lowered the prices of its vehicles in Europe, where it is lowest model 3 is now about the same price as the VW ID.3.
- Prices in the Chinese market were also cut earlier this month and people there have been protesting the cuts, even holding protests over the weekend to demand some money back. The company did not respond to this request.
First some tidbits to set the stage. In late 2022, new car prices in the US finally began to fall. Only a little, but it was the trend reversal. Also, EV sales accounted for 5.8 percent of all vehicles sold last year, up from 3.2 percent in 2021. Finally, Tesla’s share of these EV sales fell from 72 percent in 2021 to 65 percent in 2022, and the automaker didn’t meet Wall’s delivery estimates for the past year. There’s also the question of Tesla’s stock price that has recently fallen.
How all of these facts affected Tesla’s decision this week to put a big red marker on some price tags isn’t something we want to speculate on, but it’s worth having the context when you learn that Tesla announced the MSRP this week of its vehicles has been cut dramatically. The automaker slashed its prices by between 6 percent and 20 percent, with the biggest discount going to the Model Y. The entry-level Model Y received a price cut of $13,000 (20 percent) and now starts at $54,630. This brings us to another related tidbit: The Inflation Reduction Act (IRA), which changed the state tax incentive structure for electric vehicles, has a new maximum price limit for passenger vehicles to qualify. This limit? $55,000. The IRA has made further changes to the rules, meaning Tesla electric vehicles can once again qualify. at least until March.
US prices are returning to pre-2022 levels
In the US, all Tesla models cost less today than they did earlier this week, and the markdowns mean that the price of a new 2023 Tesla has returned to roughly where it was before the company made two notable price increases in 2022. Tesla has also cut prices of the Model 3 and Model Y in some European countries (Austria, France, Germany, Netherlands, Norway, Switzerland and the UK, according to CNBC). The price cuts bring the Model 3 to roughly the same price as the ID.3Volkswagen’s entry-level EV, in these markets.
Customers angry at sudden price cuts in China
Earlier this month, Tesla cut prices in China. As you might suspect, people who recently bought a new electric vehicle from the company aren’t happy. Hundreds of Tesla owners last weekend protested in Tesla showrooms across the country, Reuters reported. Tesla electric vehicle prices there are between 13 and 24 percent lower than in September. The protesters chanted, “Give the money back, refund our cars,” in a video-captured protest. Police have been involved in policing the protests in some cities, even facilitating a meeting between protesters and Tesla employees, Reuters said, but there has been no public announcement people who recently paid for something that costs much less today will receive refunds or offer other benefits.
Since there is no dealer network, Tesla cannot hide behind dealer surcharges when prices change. Given the global nature of the cuts, there should be keen interest in the EV automaker’s delivery numbers when Tesla is due to report its fourth-quarter 2022 results later this month.
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