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Tesla Announces Discounts Prices On Its Vehicles In US, And Europe To Drive Sales

Tesla Announces Discounts Prices On Its Vehicles In US, And Europe To Drive Sales
Tesla reduced prices on its electric cars in the United States and Europe, according to the automaker's website, broadening a new assertive discounting strategic plan after falling short of Wall Street delivery estimates.
According to calculations made by the media, the US price cuts will be applicable on the Model 3 sedan and Model Y crossover SUV and was announced late Thursday in US time. The discounts ranged between 6% and 20% with respect to cost for the cars prior to the the discount announcement. This is before factoring in a federal tax credit of up to $7,500, which went into effect for many electric vehicle models at the beginning of January.
It also reduced prices in the United States for its Model X luxury crossover SUV and Model S sedan.
In Germany, Tesla reduced prices on the Model 3 and Model Y, its global best-sellers, by 1% to nearly 17% depending on configuration. Prices were also reduced in Austria, Switzerland, and France.
The new price for Tesla vehicles, combined with the subsidy on electric cars being offered by the US government that went into effect this month, amounts to a 31% discount for a US buyer of the long-range Model Y. Furthermore, Tesla's move broadened the vehicles in its lineup that are eligible for the Biden administration tax credit.
Prior to the price reduction, the five-seat Model Y was ineligible for that credit, a designation that Tesla CEO Elon Musk called "messed up."
Following the price reduction, the long-range Model Y will be eligible for the $7,500 federal credit.
When combined with price cuts announced last week in China and other Asian markets, the move marked a departure in Tesla's largest markets from the strategy it had followed for much of 2022, when demand was strong and average sale prices for its electric vehicles were trending higher.
"This should really boost 2023 (Tesla) volumes," Gary Black, a Tesla investor who has remained bullish on the company and its prospects through the recent, sharp share price decline, said in a tweet. "It's the right move."
Prior to the price cut, Tesla inventory in the United States had been trending higher, as measured by the models listed as immediately available on its website. Prices for used Tesla models had also been falling, putting additional pressure on the company to lower new-car sticker prices.
This is Tesla's first major move since appointing Tom Zhu as its lead executive for China and Asia to oversee output and sales in the US.
Last week, Tesla reduced its prices in China and other Asian markets. According to media calculations, the China price for a Model 3 or Model Y was down 13% to 24% from September after the recent move, in addition to previous price cuts announced in October and recent incentives.
Prices have also been reduced in South Korea, Japan, Australia, and Singapore.
Analysts predicted that the price cuts in China would boost demand and increase pressure on rivals, including BYD, to follow suit, resulting in a price war in the world's largest single market for electric vehicles.
That pressure may be increasing in Europe as well.
Last month, Tesla's Model 3 was the best-selling electric vehicle in Germany, followed by the Model Y, which outsold Volkswagen's) all-electric ID.4. Volkswagen recently increased the price of its entry-level ID.3, bringing it in line with the Model 3's now-discounted price.
Tesla fell short of Wall Street's expectations for fourth-quarter deliveries. Full-year delivery growth was 40%, falling short of Musk's own forecast of 50% growth.
Last month, Musk stated that "radical interest rate changes" had altered the industry's outlook and that Tesla could lower prices to maintain volume growth, resulting in lower profit.

Christopher J. Mitchell

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