Tesla price cuts are coming for Europe

by The Insights

That’s deja vu for EV price reductions, at least for Tesla vehicles.

The automaker, which cut prices last week in the United States, made another cut, this time in European and Israeli markets. The reductions, which reached 9.8%, were made across the company’s entire vehicle portfolio, including the performance of the Model 3, Model Y and its more expensive Model S and Model X.

Tesla has reduced the prices of its electric vehicles sold in China, Europe and North America several times since last fall, sometimes by as much as 20%.

The company said in a statement carried by Reuters that the price cuts are part of its mission to accelerate the transition to renewable energy.

“Our master plan has set out a clear path to achieve this mission: the transformation of expensive small series products into cheaper mass production vehicles,” the statement said.

Lower prices could boost sales, but could also squeeze its automotive margins. Tesla, which has enjoyed one of the highest automotive margins in the industry, has a bit of cushion.

Price cuts have persisted as Tesla strives to expand operations and produce 1.8 million vehicles in 2023. CEO Elon Musk said on the fourth quarter and full year earnings call company review in January that the company had “the potential to make 2 million cars this year.”

Last week, Tesla slashed the price of its premium, aging Model S and Model X vehicles by $5,000 each. It also lowered the prices of its Model 3 and Model Y vehicles. Tesla cut prices in the United States as requirements to qualify for the $7,500 federal tax credit tighten. Tesla said based on new IRS guidelines, the $7,500 credit will be reduced for the rear-wheel-drive Model 3 on April 18 to $3,750.

Tesla kicked off its price reduction strategy in October when the company announced price cuts in China of up to 9% on the Model 3 and Model Y. Already this year, the price of the base Model Y is lower by 20% to what it was at the end. of 2022.

Tesla has lowered the list price on its vehicles in the United States and China several times since then. Any speculation that the cuts would end in 2023 ended in January when Tesla dramatically cut prices by up to 20%.

Tesla said earlier this month it delivered 422,875 electric vehicles in the first quarter of 2023, narrowly beating Wall Street estimates of around 420,000 units. The company produced 440,808 vehicles during the same period. In the fourth quarter of 2022, Tesla delivered 405,278 and produced 439,701 units. Those fourth-quarter deliveries were also record results, but they missed Wall Street expectations.

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