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Illustration: Rebecca Zisser/Axios

Tesla is beginning to behave like the Detroit Three carmakers during their most desperate days.

Why it matters: By pumping incentives and slashing prices, the electric car manufacturer is signaling that it prioritizes vehicle deliveries and cash generation over margins.

  • Analysts expect the hit to profits will be evident in next week's Q2 results.
  • But longer term, Tesla also risks alienating loyal customers and destroying its considerable brand equity — problems Detroit is all too familiar with.

What's happening: A dizzying string of recent price adjustments on Tesla cars is a sign of internal chaos over how to deal with shrinking U.S. incentives, aging model lines and pressure to boost deliveries, Bloomberg reports.

  • This week's $6,410 price cut on a fully loaded performance edition of the Model 3 sedan was a "bitter pill to swallow" for Tesla loyalist Laurence Blau, who paid $68,400 for the car less than three weeks ago, per Bloomberg.
  • Nobody likes to know they overpaid, especially when it comes to cars.
  • Tesla, which sells direct to consumers rather than through franchised dealers, prides itself on pricing transparency.
  • In a quarter-end push, Tesla also offered bonuses to employees to hit sales targets.
  • It worked: Tesla surprised skeptics with a record 95,200 deliveries in the second quarter.

Flashback: Detroit's efforts to 'move the metal' in the past didn't end well.

  • In the aftermath of 9/11, GM's "Keep America Rolling" campaign helped restore consumer confidence and keep factories humming.
  • Its 0% financing and employee pricing offers began an era of winning sales with expensive incentives.
  • The tactics pulled ahead natural demand but masked high labor costs and other problems.
  • To cover those high fixed costs, Detroit kept overproducing cars and slapped big discounts on the hood — until eventually the industry collapsed in 2009.

Today, Tesla has its own motivations to pump up sales, even if it means sacrificing profits, writes Barclay's automotive analyst Brian Johnston in a note to clients.

  • With future capital raises likely (maybe as soon as next year), it's important to show growth to potential investors.
  • Tesla also makes money selling regulatory credits to other carmakers, so the more cars it sells (even at a loss), the more revenue it makes from credit sales.
  • Since 2010, Tesla has reaped nearly $2 billion in revenue from selling regulatory credits to competitors that need to offset sales of their own polluting vehicles.

What to watch: Tesla reports its second-quarter financial results on July 24.

  • The outlook remains tough: As demand for more expensive Tesla models S and X wanes, Tesla's average selling prices will keep declining, making it that much tougher to achieve profitability.

Go deeper

The dark new reality in Congress

National Guard troops keep watch at security fencing. Photo: Kent Nishimura/Los Angeles Times via Getty Images

This is how bad things are for elected officials and others working in a post-insurrection Congress:

  • Rep. Norma Torres (D-Calif.) said she had a panic attack while grocery shopping back home.
  • Rep. Jim McGovern (D-Mass.) said police may also have to be at his constituent meetings.
  • Rep. Adam Kinzinger (R-Ill.) told a podcaster he brought a gun to his office on Capitol Hill on Jan. 6 because he anticipated trouble with the proceedings that day.
Off the Rails

Episode 3: Descent into madness

Photo illustration: Sarah Grillo/Axios. Photos: Tom Williams/CQ-Roll Call, Chip Somodevilla/Getty Images

Beginning on election night 2020 and continuing through his final days in office, Donald Trump unraveled and dragged America with him, to the point that his followers sacked the U.S. Capitol with two weeks left in his term. This Axios series takes you inside the collapse of a president.

Episode 3: The conspiracy goes too far. Trump's outside lawyers plot to seize voting machines and spin theories about communists, spies and computer software.

President Trump was sitting in the Oval Office one day in late November when a call came in from lawyer Sidney Powell. "Ugh, Sidney," he told the staff in the room before he picked up. "She's getting a little crazy, isn't she? She's really gotta tone it down. No one believes this stuff. It's just too much."

Convicts turn to D.C. fixers for Trump pardons

Trump confidante Matt Schlapp interviews Jared Kushner last February. Schlapp is seeking a pardon for a biotech executive. Photo: Samuel Corum/Getty Images

A flood of convicted criminals has retained lobbyists since November’s presidential election to press President Trump for pardons or commutations before he leaves office.

What we're hearing: Among them is Nickie Lum Davis, a Hawaii woman who pleaded guilty last year to abetting an illicit foreign lobbying campaign on behalf of fugitive Malaysian businessman Jho Low. Trump confidante Matt Schlapp also is seeking a pardon for a former biopharmaceutical executive convicted of fraud less than two months ago.

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