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Tesla EVs Cut Another Round Of Price Cuts, Launch Of New Model Y

Tesla, Inc has slashed prices as the company keeps the tax credits for the Model 3 and Model Y giving better prices to consumers

Tesla, Inc. announced another round of price cuts late Thursday as volume hasn’t yet responded significantly to the previously announced reductions.

Updated pricing available on Tesla’s U.S. website showed a $1,000 price cut each for the two Model 3 variants and reductions ranging from 3.4% and 5.6% for the rest of the models. The company listed a new cheaper Model Y variant priced a little under $50,000. The Elon Musk-led company also clarified that the new Model 3 and Model Y vehicles qualify for the federal tax credit for eligible buyers.

A new Model Y electric vehicle drives through the Tesla Gigafactory Berlin Brandenburg plant. The Tesla plant was opened and put into operation on March 22, 2022. In the meantime, about 10,000 people are employed there. PATRICK PLEUL/BENZINGA

Based on the new IRS guidance, the $7,500 credit will be reduced for Model 3 RWD variant to $3,750, on April 18, it added.

New prices for all four of the Tesla models have plummeted from 2% to 5% on the sticker price. Other car manufacturers have remained competitive in prices with Tesla.

Deliveries continue to rise as the company as customers purchase a vehicle as the Model 3 and Y remain the company’s best-selling vehicles.

The Treasury Department has set guidelines for tax credits, requiring all manufacturers to have battery components from the U.S. or its allies. The Model 3 will not qualify for full credit under the new rules set for April 18.

The Model 3, Y pricing listed does not reflect the $7,500 credit due to them.

The steep price cuts of up to 19.7% announced in mid-January and another tinkering for the high-end models announced in March did help boost volume amid an inclement economic environment and also intensifying competitive pressure.

But the benefits have been muted. The first-quarter deliveries report that was released earlier this month showed roughly in-line to slightly below performance, triggering a sell-off in the shares. The sales of the higher-end vehicles, the Model S and X remained anemic.

Morgan Stanley analyst Adam Jonas said in a recent report that Tesla can hit an annual deliveries number of 2 million units, but it could come only with further price reductions. The price cuts, although healthy for volume, have the potential to pinch the margin.

More details on the margin impact of the price cuts would be known when Tesla reports its first-quarter results on April 19.

Meanwhile, Tesla’s price cuts could mean more headaches for its rivals, both legacy automakers and EV startups. These companies may be forced to announce price reductions of their own or risk a loss in sales and market share.

Tesla’s rival, General Motors, will have new EV models set to go in the US market in 2024 that includes the Silverado, Blazer, and Equinox. Chevrolet is currently selling the Bolt and the Bolt EUV.

Ford is currently selling the Mustang Mach-E, F-150 Lightning, and E-Transit in competition in the EV market. 

Other rivals currently selling other EV models that are slowly catching up to Tesla. California is currently the only state to ban the sale of fossil fuel vehicles by 2035. Norway will be the first country to ban the sale of fossil fuel vehicles in 2025. 

Produced in association with Benzinga

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