Tesla cuts prices in the US and Europe to boost sales

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

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

The move in the U.S., however, could help Tesla qualify for more federal electric vehicle tax credits and boost sales volumes here and abroad after competition and interest rates rise.

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

Reuters reported that Tesla in Germany has reduced prices for 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 has pulled ahead Volkswagen and its popular electric vehicle ID.4 in Germany.

At its discounted price, Tesla’s Model 3 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 is down between 6% and 14% depending on configuration, and the cost of the Model Y is down 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 reduced the prices of its more expensive Model S sedan and falcon-wing Model X SUV in the United States

In general, electric vehicles qualify for tax credits in the US based on their form factor or category, their efficiency and range (i.e. the number of miles they can travel on a fully charged battery), as well as the manufacturer’s suggested retail price.

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

That means Tesla — and other EV manufacturers — can, for now, buy parts and critical minerals from suppliers around the world and still qualify for some EV subsidies. Those wishing to qualify for federal subsidies must complete final vehicle assembly of their electric vehicles in North America under applicable transitional regulations.

Tesla’s recent round of rebates could position the company to reap the benefits of EV tax credits in both the near and longer term. However, there is also a risk of angering customers who have just agreed to take on new electric cars from Tesla at higher prices before the end of 2022.

Earlier this month, Tesla angered customers in China by slashing prices for its Model 3 and Model Y cars there after many agreed to accept delivery before December at higher prices. 31. Some of the customers protested and demanded discounts, but according to a Reuters report, Tesla has not backed down.

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

Despite the discounts, Tesla reported deliveries of 405,278 vehicles and production of 439,701 vehicles in the fourth quarter of 2022. The company had told shareholders it expected 50% annualized vehicle shipments growth over a multi-year horizon, but fell short of that year’s 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 plant in Shanghai, and a newer one in Grünheide, Germany.

The company’s production capacity should be much higher in 2023 than previous years with those factories, but bearish analysts have raised concerns about a possible “demand cliff”.

Tesla now faces more competition, higher interest rates and lower consumer spending than in recent years, Bernstein analysts wrote in a Dec. 14 note.

They said, “We believe that many investors are underestimating the magnitude of the demand challenges Tesla is facing.” However, the company had an “underperform” rating and a $150 price target on Tesla shares after the stock price of the company had fallen in recent months.

CEO Elon Musk sold billions of dollars in his Tesla shares last year, in part to fund a roughly $44 billion leveraged buyout of Twitter. Since taking over Twitter in late October and naming himself CEO, Musk has been dividing his time and sharing some resources between the social media business and his electric car company.

Tesla plans to release its fourth-quarter 2022 results on January 1, 2023, and should then share its new outlook for the coming year.

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