Tesla, Inc. announced a new round of price cuts late Thursday as volume has yet to respond significantly to previously announced cuts.
Updated prices available on Tesla’s US website showed a price drop of $1,000 each for both Model 3 variants and reductions ranging from 3.4% and 5.6% for the rest of the models. . The company has listed a new, cheaper Model Y variant of just under $50,000. The Elon Musk-led company also clarified that new Model 3 and Model Y vehicles are eligible for the federal tax credit for eligible buyers.
Based on new IRS guidelines, the $7,500 credit will be reduced for the Model 3 RWD variant to $3,750 on April 18, he added.
The new prices for the four Tesla models have fallen 2% to 5% off the list price. Other automakers have remained price competitive with Tesla.
Deliveries continue to increase the more the company buys a vehicle, as the Model 3 and Y remain the company’s best-selling vehicles.
THE Treasury Department established guidelines for tax credits, requiring all manufacturers to source battery components from the United States or its allies. Model 3 will not be eligible for full credit under the new rules set for April 18.
The price of the 3, Y model listed does not reflect the $7,500 credit owed to them.
Sharp price cuts of up to 19.7% announced in mid-January and another tinkering for high-end models announced in March helped boost volume in an unfavorable economic environment and intensified competitive pressure.
But the benefits have been muted. The first quarter shipments report that was released earlier this month showed performance roughly in line with slightly underperforming, triggering a stock selloff. Sales of high-end vehicles, the Model S and X, remained anemic.
Morgan Stanley analyst Adam Jonas said in a recent report that Tesla could hit an annual shipment count of 2 million units, but that could only come with further price cuts. Price declines, while healthy for volume, have the potential to pinch margin.
More details on the impact of the price cuts on margins will be known when Tesla releases its first-quarter results on April 19.
Meanwhile, Tesla’s price cuts could mean more headaches for rivals, both traditional automakers and electric vehicle startups. These companies may be forced to announce price reductions themselves or risk losing sales and market share.
Tesla rival General Motors will have new EV models is expected to enter the US market in 2024, which includes the Silverado, Blazer and Equinox. Chevrolet currently sells the Bolt and Bolt EUV.
Ford currently sells the Mustang Mach-E, F-150 Lightning and E-Transit competing in the electric vehicle market.
Other rivals are currently selling other EV models that are slowly catching up with Tesla. California is currently the only state to ban the sale of fossil fuel vehicles by 2035. Norway will be the first country to ban the sale of fossil fuel vehicles in 2025.
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