Tesla reduces prices up to a fifth in the US and Europe because of slowing demand

Tesla has reduced the price of its cars in America and Europe by as much as a fifth to meet the competition.

American carmaker, Ford, increased its sales by 40% in 2022 to 1.3 million, making it the largest producer of pure battery electric cars worldwide, surpassing China’s BYD. Investors have begun to be concerned that the slowdown in key markets could limit sales growth.

To comply with the bans on internal combustion engines in Europe and the UK at the end of this decade, carmakers all over the globe are increasing production of electric cars. Tesla will be challenged by electric-only competitors such as Fisker, Lucid, and Polestar, as well as long-established brands like Volkswagen, General Motors, and Hyundai.

After a time when supply outstripped demand due to coronavirus-related supply chain disruptions, carmakers are now focusing on the possibility of falling demand.

Tesla’s stock price has fallen by more than 50% since 2021, when investors were excited. This is due to concerns about demand. Tesla’s market value fell by more than two-thirds, from over $1.2tn in December 2021 to below $400bn in 2019.

According to Guinness World Records, Elon Musk, the chief executive of Tesla and its major shareholder, has lost the title for the greatest personal fortune loss in history. Also, the devaluation of the carmaker is thought to be due to Musk’s distraction with his takeover of Twitter.

Pre-market trading saw Tesla shares drop by 6% on Friday.

The Model 3 saloon, which is the rear-wheel-drive version, has seen its price drop by PS5,500, to PS42,990. Although the Model Y crossover was the cheapest, it dropped to PS44.990. However, the largest price drop was for the Performance model, which fell by PS8,000 to PS59.990.

The entry-level Model Y in the US now costs $52,990 (PS43.526). This is a 20% decrease from $65,990. It will qualify for US tax credits. The Model 3 was reduced to $43,990 by $3,000

Analyst at US investment bank Wedbush Dan Ives stated that the price cuts in Europe and the US were “eye-popping”, and that investors would likely respond negatively. He said that a “EV price war” was currently underway between manufacturers.

He said that it was Musk’s “right strategic poker move” and that cuts could increase deliveries by 12% to 15%.

Ives stated that Tesla now has global reach and the margin flexibility to make aggressive moves in order to increase market share in this EV arms race.

Chief executive of Electrifying.com was Ginny Buckley. She stated that Tesla buyers who have taken delivery in the past months will be “less than impressed” by the move. This could eventually undermine the company’s confidence.

She said that carmakers are likely to manage incentives and prices carefully in order to avoid customers being upset and crashing used values.

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