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Tesla Cuts Prices Globally In An Aggressive Challenge To Its Rivals

Tesla Cuts Prices Globally In An Aggressive Challenge To Its Rivals
After it fails to meet the estimates of Wall Street for delivery of its vehicles for 2022, the electric car maker Tesla Inc has challenged its Rivals by slashing its prices globally for its electric cars by as much as 20% and thereby has furthered its aggressive strategy of discounting to combat rivalry.
Over the last 2 years, the orders for new vehicles of Tesla had been more than its supply capacity and this latest move by the company indicates a reversal from its strategy of holding demand by under-cutting supply. Last year co founder loan mask had considered that the prices of the company's vehicles had become "embarrassingly high" and such prices could impact demand.
The latest move by the company pulled down its shares by 0.9% after they had dropped by as much as 6.4% on Friday. 2022 was the worst year for Tesla stocks since it was founded and this was because of is a slowdown of its business growth in China and Elon Musk getting busy with acquiring Twitter.
With a series of cuts in its prices last week in Asia, Tesla further lowered the cost of its vehicles in the United States Europe and Africa. According to analysts this latest strategy of discounting by Tesla is a clear indication that it is targeting its smaller competitors that have been losing cash, as well as established automakers that are speeding up their capacities for the production of electric vehicles.
 “Competition is coming and they are responding with price cuts,” said Thomas Hayes, chairman and managing member at Great Hill Capital.
For those buyers who had been previously unable to purchase high-priced electric cars, this series of discounts could make the electric cars affordable to them. Customers in the United States and France full also benefit from both the discounts offered by the company as well as federal Tax credits that are being given in both countries for purchases of some electric vehicles. 
Tesla cut the price of its top sellers the model 3 Sedan and the model crossover SUV for the United States Market by 6% to 20%. According to media calculations, the price of the basic model Y will be now at dollar $52,990 compared to $65,990 previously.
These appointment discounts by Tesla were announced prior to a $7500 federal Tax credit announced by the US government that was applicable for a number of electric vehicles starting January 1. Coupled with the company discount, Tesla cars could be cheaper by more than 30%.
Tesla also reduced prices in the United States for its Model X luxury crossover SUV and Model S sedan.
A Tesla Germany spokesperson stated that lower cost inflation was also a factor in price reductions in the company's top European market, but did not specify which costs had fallen.
Tesla reduced Model 3 and Model Y prices in Germany by 1% to nearly 17%. The most popular Model Y will now cost 44,890 euros ($48,499), a reduction of 9,100 euros.
Prices were also reduced in Austria, Switzerland, and France.
Customers in France who purchase the Model 3 for 44,990 euros will now receive a 5,000 euro government subsidy on an EV scheme with a threshold of 47,000 euros.
The move broadens the range of Tesla vehicles eligible for the Biden administration's tax credit.
Prior to the price cut, the five-seat Model Y was ineligible, which Musk called "messed up." The long-range Model Y will be eligible after the price reduction.
After tax credits, a Model Y could cost $18,000 less than Ford's rival Mustang Mach E, according to Deutsche Bank. It estimated that Tesla's vehicle gross profit margins, which are among the highest in the industry, would fall 3 percentage points in 2023 versus 2022, but Tesla's "bold offensive move" secured growth and put competitors in great difficulty, according to the broker.
While Tesla shares fell, rival stocks suffered even more.
General Motors Co and Ford Motor Co fell 4.5% and 6%, respectively, to rank among the worst performers on the broad-market S&P 500 Index, while Stellantis NV fell 3.7% and Volkswagen AG fell 3.6% in Europe.
According to Wedbush analyst Dan Ives, the move could increase global deliveries by 12% to 15% this year and demonstrates Musk's response to growing competition.
Tesla supporters and customers complained that the price reductions disadvantaged those who had recently purchased a vehicle.
Greg Woodfill of Seattle, who purchased a Model Y in December, considered waiting until the new year to receive the US subsidy but was swayed by a $3,750 discount at the time.
The Tesla fan, who previously owned a Model 3, stated that he was dissatisfied with Musk's antics but decided to purchase a Model Y because he loved Tesla products.
"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 by 6-13.5% last week, owners protested at delivery centers, demanding compensation.
By 2021, the United States and China would have accounted for approximately 75% of Tesla sales, but Europe has been growing.
Last week, Tesla cut prices in China and other Asian markets, which analysts predicted would boost demand and put pressure on rivals, including BYD, to follow suit in what could turn into a price war in the world's largest single EV market.

Christopher J. Mitchell

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