Tesla is cutting prices in the US and Europe to boost demand

  • Tesla cuts prices in the US and Europe by up to 20%
  • The move follows price cuts in Asia last week
  • Some models already qualify for US tax credits
  • The price of the Model 3 in Germany is in line with the Volkswagen ID.3

January 13 (Reuters) – Tesla (TSLA.O) cut prices of its electric vehicles in the United States and Europe by as much as 20%, extending its aggressive discounting strategy after Wall Street estimates for 2022 deliveries are missing.

The move, which sent Tesla shares down 3.8 percent in Frankfurt, came after CEO Elon Musk warned that the prospect of a recession and higher interest rates meant may lower vehicle prices to maintain volume growth at the expense of profit.

The lower prices in Tesla’s core markets mark a reversal from the strategy the automaker followed for most of 2021 and 2022, when orders for new vehicles outpaced supply. musk recognized last year that prices had become “disturbingly high” and could hurt demand.

The U.S. price cuts announced late Thursday U.S. time for the Model 3 sedan and Model Y crossover SUV ranged between 6 percent and 20 percent from pre-discount prices, according to Reuters calculations.

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

The following is a table of price reductions by model in Germany and the United States:

Reuters Graphics

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

In Germany, it cut the prices of the Model 3 and Model Y – the world’s best-sellers – by between about 1% and almost 17%, depending on the configuration. It also cut prices in Austria, Switzerland and France.

For an American long-haul Model Y buyer, Tesla’s new price, combined with the US subsidy that went into effect this month, amounts to a 31% discount. In addition, Tesla’s move expanded the vehicles in its lineup eligible for a tax credit from the Biden administration.

Before the price cut, the five-seat version of the Model Y was ineligible for that credit, a designation Musk called “confused.” After the price cut, the long-haul version of the Model Y will be eligible for a $7,500 federal credit.

“This should really boost (Tesla’s) volumes for 2023,” Gary Black, a Tesla investor who has been bullish on the company and its prospects through the recent sharp drop in stock prices, said in a tweet. “It’s the right move.”

However, some users on Tesla fan forums online have complained that the price cuts are putting customers who recently purchased their car at a disadvantage, leaving them with less value in the used car market.

“I am not very happy with these huge price swings. Just dropping €10,000 like that definitely makes you feel like you just paid too much,” one user wrote on the Tesla Drivers & Friends forum on Friday.

In China, where Tesla cut prices last week by 6-13.5%, owners protested at delivery centers across the country, pressing Tesla for compensation.

Before the price cut, Tesla’s inventory in the United States, tracked by the models shown on its website as immediately available, was increasing. Prices of used Tesla models are also on the declineincreasing pressure on it to adjust sticker prices for new cars.

For 2021, the United States and China combined accounted for about 75% of Tesla’s sales, although the automaker is increasing sales in Europe, where its Berlin factory is ramping up production.

Reuters Graphics


The change is Tesla’s first major move since it appointed its top executive for China and Asia, Tom Zhu, to oversee U.S. production and sales.

Tesla cut prices in China and other Asian markets last week. Along with previous price cuts announced in October and recent incentives, China’s price for a Model 3 or Model Y is down 13 percent to 24 percent from September after the recent move, Reuters calculations show.

Tesla also cut prices in South Korea, Japan, Australia and Singapore.

Analysts said the price cut in China would boost demand and increase pressure on rivals there, including BYD (002594.SZ)to follow suit in what could become a price war in the largest single market for electric vehicles.

This pressure may be growing in Europe as well.

Tesla’s Model 3 was the best-selling electric car in Germany last month, followed by the Model Y, ahead of Volkswagen (VOWG_p.DE) all electric ID.4. Volkswagen recently raised the price of its entry-level ID.3, putting it on par with the already discounted Model 3.

Tesla missed Wall Street estimates for fourth-quarter deliveries. Full-year shipment growth was 40% — also below Musk’s own forecast of 50%.

Tesla shares under pressure

Reporting by Zhang Yan in Shanghai, Hyunju Jin in Seoul, Victoria Waldersee in Berlin; Writing by Kevin Krolicki in Singapore; Editing by Lincoln Feist, Kenneth Maxwell, Mark Potter and Alexander Smith

Our standards: Thomson Reuters Trust Principles.

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