Tesla cuts prices in the US and Europe to increase sales

Electric car maker Tesla is cutting prices in the US and across Europe again, according to listings on the company’s website Thursday night in the US

Tesla did not respond to a request for comment on what motivated it to cut prices this week.

However, the U.S. move could help Tesla qualify for more federal tax credits for electric cars, and boost sales volume here and abroad, after competition and interest rates increased.

In Europe, Tesla cut the prices of its Model 3 and Model Y vehicles in Austria, France, Germany, the Netherlands, Norway, Switzerland and the United Kingdom

Reuters reported that in Germany, Tesla cut prices on the Model 3 and Model Y from 1% to around 17%, depending on the configuration. Tesla’s Model 3 was the best-selling electric vehicle in Germany in December 2022, followed by the Model Y. The company beat out Volkswagen and its popular electric vehicle ID.4 in Germany.

Tesla’s Model 3 at a discounted price is comparable to Volkswagen’s entry-level electric car, the ID.3.

According to independent EV industry researcher TroyTeslike, the price of a new Tesla Model 3 in the US has fallen between 6% and 14%, depending on configuration, and the price of the Model Y has fallen by about 19%, also depending on configuration.

The Model 3 is Tesla’s entry-level sedan. The Model Y is categorized by some as a sport utility vehicle and by others as a crossover. The company also lowered the prices of its more expensive Model S sedan and falcon-winged SUV Model X vehicles in the US

Generally, electric cars qualify for tax credits in the US, depending on the form factor or category they fall under, their efficiency and range (meaning the number of miles they can travel on a fully charged battery) as well as the manufacturer’s suggested retail price. .

The US government has delayed setting new rules on sourcing raw materials and battery components to qualify automakers for a $7,500 vehicle tax credit until at least the end of March 2023.

This means that Tesla – and other electric car manufacturers – can buy parts and critical minerals from suppliers around the world for the time being, and still qualify for some electric car subsidies. Those seeking to qualify for federal subsidies must complete final vehicle assembly of their electric vehicles in North America under the current interim rules.

The latest round of rebates from Tesla could set the company up to reap the benefits of tax credits for electric cars in both the short and longer term. But it also risks upsetting customers who just agreed to take delivery of new electric cars from Tesla before the end of 2022 at higher prices.

Earlier this month, Tesla angered customers in China by cutting the prices of its Model 3 and Model Y cars there after many had agreed to take delivery at higher prices before December 31. Some of the customers staged protests and demanded discounts, but so far, Tesla has not relented, according to a Reuters report.

In late December, Tesla reduced its Model 3 and Model Y cars by about $7,500 to entice customers to take delivery before the end of the fourth quarter. Tesla also offered some US customers 10,000 miles worth of free charging (at Tesla Supercharging stations) if they agreed to take delivery before the end of the year.

Despite the discounts, in the fourth quarter of 2022 Tesla reported deliveries of 405,278 vehicles and production of 439,701 vehicles. The company had told shareholders to expect 50% annual growth for vehicle deliveries over a multi-year horizon, but fell back on the annual target and analysts’ expectations in the fourth quarter.

Tesla now operates its first US vehicle assembly plant in Fremont, California, a newer one in Austin, Texas, its first overseas factory in Shanghai, and a newer one in Gruenheide, Germany.

The company’s production capacity should be much higher in 2023 than previous years with these factories, but bearish analysts have expressed concern over a possible “demand cliff”.

Tesla now faces more competition, higher interest rates and slower consumption than in recent years, Bernstein analysts wrote in a Jan. 12 note.

They said: “We believe that many investors are underestimating the extent of the demand challenges facing Tesla.” However, the firm has maintained an “underperform” rating and $150 price target on shares of Tesla after the company’s share price fell in recent months.

CEO Elon Musk sold billions of dollars worth of his Tesla shares last year, in part to finance a leveraged buyout of Twitter for about $44 billion. Since taking over Twitter and naming himself CEO in late October, Musk has split his time, and some resources, between social media and his electric car company.

Tesla plans to report its fourth quarter 2022 results on January 25, 2023, and should share its new outlook for the year ahead.

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