Cyprus Mail

Tesla turns up heat on rivals with global price cuts

file photo: tesla china made model 3 vehicles are seen during a delivery event at its factory in shanghai
FILE PHOTO: Tesla China-made Model 3 vehicles during a delivery event at its factory in Shanghai, China

Tesla has slashed prices globally on its electric vehicles by as much as 20 per cent, extending an aggressive discounting effort and challenging rivals after missing Wall Street delivery estimates for 2022.

The move marks a reversal from the automaker’s strategy over the last two years when new vehicle orders exceeded supply. It comes after CEO Elon Musk warned that the prospect of recession and higher interest rates meant it could lower prices to sustain growth at the expense of profit.

Musk acknowledged last year that prices had become “embarrassingly high” and could hurt demand. Shares were down 3.6 per cent on Friday, following the stock’s worst year since its inception due to delivery issues and growing competition.

Tesla lowered prices across the United States, Europe, the Middle East and Africa, following a series of cuts last week in Asia, in what analysts saw as a clear shot at both smaller rivals that have been bleeding cash and legacy automakers aggressively ramping up electric vehicle production.

“Competition is coming and they are responding with price cuts,” said Thomas Hayes, chairman and managing member at Great Hill Capital.

The discounts may make EV cars affordable to people who were previously priced out of the market. US and French buyers could take advantage of both the discounts and federal tax credits available in both countries for certain electric vehicle purchases.

The US price cuts on Tesla’s global top-sellers the Model 3 sedan and Model Y crossover SUV were between 6 per cent and 20 per cent, Reuters calculations showed, with the basic Model Y now costing $52,990, down from $65,990.

Those cuts are before a $7,500 US federal tax credit that took effect for many electric vehicles on January 1 that could bring discounts to more than 30 per cent.

Tesla also cut prices for its Model X luxury crossover SUV and Model S sedan in the United States.


A spokesperson for Tesla Germany said lower cost inflation was also a factor in reducing prices in its top European market, without specifying which costs had fallen.

In Germany, Tesla lopped prices by about 1 per cent to almost 17 per cent on the Model 3 and the Model Y depending on the configuration. The best-selling Model Y will now go for €44,890, down by €9,100 euros.

It also reduced prices in Austria, Switzerland and France.

In France, customers buying the Model 3 for €44,990 will now get a further reduction through a government subsidy of €5,000 on an EV scheme with a threshold of €47,000.

For a US buyer of the long-range Model Y, the new Tesla price combined with the US subsidy amounts to a discount of 31 per cent. The move broadens the vehicles in Tesla’s line-up eligible for the Biden administration tax credit.

Before the price cut, the five-seat version of the Model Y had been ineligible, which Musk called “messed up.” After the price cut, the long-range version of the Model Y will qualify.

Shares fell as investors worried the move might erode bumper margins, even if it boosts sales volumes. But stocks of rivals were hit even harder.

US automakers General Motors and Ford Motor fell 4.9 per cent and 6.1 per cent, respectively, making them among the biggest losers on the broad-market S&P 500 Index, while in Europe, Stellantis fell 3.9 per cent and Volkswagen dropped 2.8 per cent.

Wedbush analyst Dan Ives said the move could boost global deliveries by 12 per cent to 15 per cent this year and shows Musk responding to growing competition.


Tesla fans and customers complained the price cuts disadvantaged those who had recently bought a vehicle, leaving them with a lower second-hand value.

Greg Woodfill in Seattle, who bought a Model Y in December, had considered waiting until the new year to get the US subsidy, but was lured by a discount at the time of $3,750.

“It’s a punch in the gut, to be honest,” he told Reuters on Friday, adding that it feels unfair Tesla sought to boost fourth-quarter sales with discounts, only to cut prices even more a month later.

“If they knew they would drop the price this much, they should have just done it in December.”

In China, where Tesla cut prices last week by 6-13.5 per cent, owners protested at delivery centres, calling for compensation.

For 2021, the United States and China combined had accounted for about 75 per cent of Tesla sales, but it has been growing in Europe.

Tesla cut prices in China and other Asian markets last week, which analysts had said would boost demand and increase pressure on rivals, to follow suit in what could become a price war in the largest single EV market.

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