Electric Vehicle automaker Tesla has once again slashed the prices of its vehicles in the U.S., making it the sixth time it has done so.
Tesla which is set to report its first-quarter results today, lowered the prices of its Model Y “long-range” and performance vehicles, in the face of rising interest rates that may affect consumer demand.
In the U.S., the prices of its Model Y AWD, Long Range, and Performance Vehicle have been slashed with a $3,000 discount. The Model Y AWD was slashed from $49,990 to $46,990. The long-range went from $52,990 and is now pegged at $49,990, while performance was slashed from $56,990 to $53,990.
On the prices of its Model 3, the standard range RWD was slashed from $41,990 to $39,990. While some Model 3 variants are still eligible for the $7,500 federal tax credit, with several others reduced to $3,750 following the U.S. treasury’s updated battery sourcing guidance for EV tax credits.
Tesla has additionally slashed the price of its base Model 3 by 11% in the U.S., its biggest market, since the beginning of the year, with a 20% drop on its base Model Y.
The EV giant’s recent slash of its vehicle models in the U.S. is coming after it announced price cuts for its vehicles in European markets which include Germany and France while also cutting prices in Singapore and Israel.
These cuts came after Tesla revealed its deliveries had only increased by 4% in the first quarter compared to Q4 2022 despite significant price reductions across all of its major markets, including the United States and China.
Investors King understands that Tesla’s incessant price cuts are occurring after its CEO Elon Musk confirmed that prices would continue to drop to increase demand. The recent price cuts reflect a structural cost advantage that will enable it to pressure rivals as it seeks to capture consumers and dominate the EV market.
It is interesting to note that ever since April 2022, Tesla has consistently built more cars than it delivered to customers, causing inventories of its increasingly aging vehicles to swell just as more competitors are hitting the streets.
However, these price cuts have raised investors’ concerns about the company’s industry-leading profit margins. Investors have begun to question if the company grew too quickly.
Also, they are worried that consistently cutting prices can be a risky endeavor, noting that if customers start to expect a carmaker will continue to lower its asking price, it can spur them to hold off on their purchase.
However, these investors are keen on Tesla’s first-quarter results, which will reveal whether the company’s cost-cutting culture has found a way to comfortably absorb the competition, without endangering profitability.
