With its sales declining and its stock price tumbling, Tesla Inc. significantly slashed prices on several versions of its electric vehicles, making some of its models eligible for a new federal tax credit that could help spur buyer interest.
The company dropped prices nearly 20% in the USA on some versions of the Model Y SUV, its top seller. The price cut will make more versions of the Model Y eligible for a $7,500 electric-vehicle tax credit, which will be available through March. Tesla also reduced the base price of the Model 3, its least expensive model, by about 6%. Far from pleasing investors, the sharp price cuts sent Tesla shares down nearly 2% in late-afternoon trading Friday. Since the beginning of last year, the stock has plummeted more than 65%. Many investors fear that Tesla’s sales slowdown will persist and have grown concerned about the erratic behaviour of CEO Elon Musk and the distractions caused by his $44 billion purchase of Twitter.
Based on the current short delivery times for Tesla vehicles that once were months long, Tesla’s once-sizable order backlog may have been depleted, said Scott Case, CEO of Recurrent, who analyses the new and used EV markets.
Customers either were awaiting this year’s federal tax credits, according to Case, or switched to competitors.
Competitors generally lack Tesla’s economies of scale and other efficiencies and may struggle to match the price cuts. If this case Tesla could manage to keep vehicle sales at sufficient levels. “They can afford to make this cut and not be lighting money on fire,” Case said. Messages were left Friday seeking a comment from Tesla.
Tesla still faces the threat of intensifying competition from other automakers in the United States and globally for years to come. Last year in the United States, total EV sales soared nearly 65% from 2021. Automakers sold 47 electric vehicle models; only four were Teslas. S&P Global Mobility expects the number of EV models to surge to 159 by 2025. And as overall EV sales are rising, Tesla’s U.S. market share is falling. From 2018 through 2020, Tesla represented about 80% of the EV market. By 2021, that figure had sunk to 71%, and it’s continued to decline, according to registration data gathered by S&P. Still, Tesla’s U.S. sales rose 40% last year, and S&P expects them to continue to rise as overall electric vehicle sales steadily increase. Even with U.S. tax credits, EVs remain pricey compared with gas-powered vehicles, largely because of the high cost of batteries.