Tesla cuts prices in US, Europe in pivot to drive sales

In Germany, Tesla cut prices on the Model 3 and the Model Y – its global top-sellers – by between about 1% and almost 17% depending on the configuration. It also cut prices in Austria, Switzerland and France.

For a US buyer of the long-range Model Y, the new Tesla price combined with the US subsidy that took effect this month amounts to a discount of 31%. In addition, the Tesla move broadened the vehicles in its line-up eligible for the Biden administration tax credit.

Before the price cut, the five-seat version of the Model Y had been ineligible for that credit, a designation that Tesla Chief Executive Elon Musk had called “messed up.” After the price cut, the long-range version of the Model Y will qualify for the $7,500 federal credit.

Taken together with price cuts announced last week in China and other Asian markets, the move marked a reversal in Tesla’s largest markets from the strategy it had pursued through much of 2022 when demand was strong and average sale prices for its electric vehicles had been trending higher.

“This should really boost 2023 (Tesla) volumes,” Gary Black, a Tesla investor who has remained bullish on the company and its prospects through the recent, sharp share price decline, said in a tweet. “It’s the right move.”

Before the price cut, Tesla inventory in the United States, as tracked by the models its website shows as immediately available, had been trending higher. Prices on used Tesla models had also been declining, increasing the pressure on it to adjust new-car sticker prices.

NEW SALES LEADERSHIP

The shift is the first major move by Tesla since appointing its lead executive for China and Asia, Tom Zhu, to oversee US output and sales.

Tesla cut prices in China and other Asian markets last week. Along with a previous price cuts announced in October and recent incentives, the China price for a Model 3 or Model Y was down 13% to 24% from September after the recent move, Reuters calculations showed.

Tesla has also cut prices in South Korea, Japan, Australia and Singapore.

Analysts had said the China price cuts would boost demand and deepen the pressure for its rivals there, including BYD to follow suit in what could become a price war in the largest single market for electric vehicles.

That pressure could be building in Europe as well.

Tesla’s Model 3 was the best-selling electric vehicle in Germany last month, followed by the Model Y, beating out Volkswagen’s all-electric ID.4. Volkswagen recently raised the price of its entry-level ID.3, putting it on parity with the now-discounted Model 3.

Tesla missed Wall Street estimates for fourth quarter deliveries. Full year growth in deliveries was 40% – also short of Musk’s own forecast of 50% growth.

Last month, Musk said “radical interest rate changes” had changed the industry-wide outlook and that Tesla could lower pricing to sustain volume growth, which would result in lower profit.

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