Jan 13, 2023 - Economy

Tesla cuts prices on new models in U.S.

Photo taken on Oct. 26, 2020 shows the Tesla China-made Model 3 vehicles at its gigafactory in Shanghai, east China.

New vehicles at the Tesla Gigafactory in Shanghai, China, in 2020. Photo: Ding Ting/Xinhua via Getty Images

Tesla has made significant cuts to the prices of new electric vehicle models in the U.S., according to listings on its website.

Driving the news: Elon Musk's firm has cut the price of its bestselling Model Y and Model 3 vehicles, along with its Model X sport utility vehicles and Model S luxury sedans.

  • The price changes could enable some buyers to qualify for the $7,500 federal tax credit that can be applied to many electric vehicle models.

The big picture: The price cuts come as Tesla experiences a declining market share and analysts say the firm is facing a "significant demand problem."

  • The company saw its stock plunge 65% in 2022, marking its worst-ever annual drop.

Our thought bubble: The latest price cuts, along with those in Germany, China and other Asian countries, add to the worries of a demand slowdown for Tesla at a time when investors are already casting doubt on Musk’s leadership abilities, with Twitter taking more of his focus.

Worth noting: Some investors, including Cathie Wood, have suggested price cuts could be welcome amid growing competition, especially as higher volumes could reduce production costs and make up for smaller margins.

  • On the other hand, growing competition could push the company into a pricing war with other EV startups, particularly in China.
  • As for his attention and focus, Musk has said he hasn't missed "a single important Tesla meeting" since taking over Twitter.

Be smart: In "addition to the $13,000 price drop, the base Model Y is another $7,500 cheaper for those who qualify for the full tax credit, meaning a Model Y ordered today could be more than $20k cheaper than one ordered yesterday — assuming delivery is taken before mid-March, when the tax credit is expected to be reduced to $3,750," Electrek noted.

What to watch: How angry recent customers might be. In China, customers who missed out on new deals have been protesting and demanding rebates.

  • Tesla missed analyst estimates for fourth quarter deliveries, and the company will report full year financial results for 2022 on Jan. 25.

Editor's note: This article has been updated with additional details throughout.

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