Tesla cuts prices of its EVs in US, Europe by 20% to boost demand: Report

In a bid to boost demand, Tesla has cut prices on most of its electric cars by as much as 20 percent in the US and Europe, news agency ANI has reported citing a New York Times report.

According to the report, the automaker is facing increasingly stiff competition in the global market for electric vehicles. 

“It also must contend with rising interest rates in the US, which have increased the cost of financing vehicle purchases, the report states.

“I think Tesla recognises they are not the only game in town and the Detroit companies are jumping into the deep end with EVs,” said Dan Ives, a Wedbush analyst. “I think the price cuts mean Tesla is going to rip the Band-Aid off and try to go on the offensive.”

Tesla stock fell sharply in early trading Friday after the price cuts were reported, but ended the day less than 1 per cent lower, the American newspaper said. The share price has fallen roughly 70 per cent since November 2021.

The newspaper said the cuts would allow some of Tesla’s lower-priced models, depending on optional features, to qualify for federal tax credits of $7,500 that were made available starting January 1 under the Inflation Reduction Act. The credit is available on electric cars priced under $55,000.

Also Read: Elon Musk faces US trial for ‘false’ 2018 tweet on Tesla privatisation – Details

The company has enjoyed rapid growth for the last decade but now must contend with a variety of challenges, including concerns that its chief executive, Elon Musk, is too preoccupied with Twitter, the social media platform he acquired last year for $44 billion.

Musk has sold billions of dollars of Tesla stock to finance the Twitter acquisition, which has depressed Tesla’s stock price, and he has come under fire for firing a large portion of Twitter’s employees, according to New York Times.

The report said Musk has also aired polarising political views on the social media platform — including several messages that appeared to support Russia in its war against Ukraine — that have hurt his and Tesla’s reputation with some consumers.

Tesla is not alone in dealing with slowing sales. US auto sales fell about 8 per cent last year to fewer than 14 million cars and trucks, the lowest level since 2011, mainly because shortages of computer chips prevented manufacturers from producing as many vehicles as consumers wanted to buy. In addition, rising borrowing rates made customer financing more expensive, the newspaper reported on Friday.

As per Reuters calculations, the US price cuts on Tesla’s global top-sellers the Model 3 sedan and Model Y crossover SUV were between 6 percent and 20 percent, 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 percent.

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

Sales of electric vehicles, however, rose 66 per cent to more than 808,619, according to Kelley Blue Book, a market researcher. And while Tesla continues to dominate the segment, several automakers are gaining ground. Ford, Volkswagen and several other automakers posted sizable increases in EV sales last year, and these offer many models that were significantly more affordable than Tesla’s. Hyundai and its affiliate Kia together sold more than 43,000 electric vehicles in the United States in 2022, up from a just few hundred in 2021, according to the New York Times.

New competitors are on the way, too. This year, General Motors is supposed to start making electric versions of its Chevrolet Silverado pickup and Chevrolet Blazer and Equinox sport utility vehicles.

Tesla has also had trouble in China, its largest market. A local manufacturer, BYD, is now the No. 1 electric vehicle brand. Tesla recently lowered prices in China and reported a global sales total for 2022 that was below analysts’ expectations, the New York Times reported. 

(With inputs from ANI)

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