According to the official website, Tesla has made significant cuts to the prices of new electric vehicles models in the U.S.
Elon Musk of Tesla has declared a price cut on its bestselling Model Y, along with its Model X, the SUV, and Model S, the luxury sedan.
Why it was necessary to cut the price for Electric Vehicles?
The price cut comes as Tesla experiences a declining market share. And analysts say that the firm is facing serious demand problems for its electric vehicles.
- The worst-ever annual drop was in the year 2022. This year the company saw an approximate 65% plunge in its stock.
- The price cuts in Germany, China, and other Asian countries, add to the worries of a demand slowdown for Tesla.
- Investors are already casting doubt on Musk’s leadership abilities, considering the cases with Twitter.
- Some investors have suggested price cuts could be welcome amongst the growing competition. The higher volumes could reduce production costs and make up for the smaller margins.
- Even the growing competition could push the company into a pricing war with other EV startups.
The US carmaker expanded its sales by 40% during 2022 to 1.3m. And the U.S. is the world’s largest manufacturer of pure battery electric cars. However, investors are worrying that the sale growth will be limited by economic slowdowns in some of its key markets.
Carmakers around the arena are ramping up the manufacturing of electrical automobiles to conform with bans on internal combustion engines. And this law will come into implementation within UK and Europe by the end of this decade.
Tesla faces competition from new electric-powered vehicle manufacturers such as Lucid, Fisker, and Polestar in addition to well-established car manufacturers like Volkswagen, General Motors, and Hyundai.
After a duration, while the delivery of new cars outstripped demand due to coronavirus pandemic-associated delivery chain disruption, carmakers’ attention is turning to the opportunity of falling demand.
The investors’ enthusiasm was at its height in 2020. And this contributed to the plunge in Tesla’s inventory market valuation. Tesla’s marketplace value has fallen by more than two-thirds. The market value of Tesla comes down to $400bn from more than $1.2tn in November 2021.
A Tesla spokesperson stated the agency had seen “a normalization of a number of the price inflation” after “a turbulent year of deliver chain disruptions”, which allowed it to reduce costs for customers.
According to the Guinness World Record report, the fall in cost and the market demand of Tesla replaced Elon Musk, its CEO, and foremost shareholder, from the top list sector’s richest person.
Tax Credit and Price Cut Benefits:
The price changes and the federal tax credit of $7,500 may attract buyers to many electric vehicle models.
“With a tax credit of $7,500, U.S. people will also get the added benefit of a price drop of $13,000. That means the delivery of EV before Mid-March, you may get more than a $20k cheaper rate for your vehicle.”
Tesla has cut the prices of its cars in the US and Europe by up to a fifth as it contends with slowing demand and increased competition.
The cost of the starting Model 3 saloon car with the rear-wheel drive model, dropped from £5,500 to £42,990. The other Model Y crossover dropped to £44,990. Also, the maximum cut was £8,000 to £59,990 for the most expensive performance model.
In the United States, a 20% price drop is applicable as US tax credits for entry-level models. This will come from $65,990 to $52,990 (£43,526). And a tax Credit reduction of $3,000 for the Model 3.
Dan Ives, an analyst at US funding financial institution Wedbush, stated that the United States and European cost cuts were “eye-popping”. He told that an “EV charge war” among producers become now underway.
However, he said it was the “right & appropriate strategic poker move by Elon Musk”. And this cuts may increase the deliveries by between 12% and 15%.
“Globally tesla is now moving aggressively with marginal flexibility to gain further market share in this EV arms race,”
The CEO of car website Electrifying.com, Ginny Buckley stated that Tesla buyers who took delivery in recent months would be “less than impressed by the move, which could ultimately undermine confidence in the company”.
She also added, “ Carmakers will usually carefully manage prices and incentives to avoid crashing used values and upsetting customers”.
Conclusion:
The electric vehicles market is growing rapidly and customers are now aware to go for a green, clean, and sustainable environment. For this, alternative fuel vehicles are a good choice to save nature, and even a very economical effort.
And automobile giants like Tesla are offering price cuts in their many car models to attract people and to compete in the present market.
