On the night of Thursday, January 12, 2023, Tesla announced price slashes on its most popular vehicles in Europe and the United States. The discounts range from 6% to 20% on the Model 3 and Model Y vehicles.

The new cut is coming at a time when Tesla’s United States vehicles recently qualified for additional $7,500 tax credit from President Biden’s Inflation Reduction Act. Once considered a luxury vehicle, the new price cuts bring most Tesla models closer to average buyers.

For example, the starting price of Model X went down by 9% while that of Model S slipped by nearly 10%. The starting price of the Model 3 is now $53,990—before tax credit. Also, the price of the long-range Model Y crossover dropped to $52,990. With such low prices, Tesla can now compete with other automakers entering the market en masse this year.

The new lower prices are significant because it allows customers to qualify for the federal tax incentive on new EV purchases. Under the new terms, only EVs with prices below $55,000 will qualify for the $7,500 tax credit established in the Inflation Reduction Act signed into law by President Biden in August 2022.

The price of Tesla’s Model 3 is now closer to GM’s Chevrolet Bold which starts at around $30,000. The Chevy Blazer EV is expected to debut this summer with a starting price of $44,995. Tesla’s price slash is bad news for Ford which recently hiked the base price of the F-150 Lightning electric truck from $40,000 to $56,000.

Dan Ives, a Wedbush analyst said Musk is playing a “strategic poker move”. According to Ives, Tesla is trying to defend its territory and retain the title of top seller of electric vehicles across the globe. 

“This is a clear message to European automakers and startups that Tesla is not going to play nice in the sandbox with an electric vehicle price war now underway,” Ives wrote.

Price cut is Tesla’s strategy to manage plunging demand

Apart from sparking an EV price war, Tesla’s price cut appears to be an attempt to revive the slowing demand for its technology-laden EVs. In the past, Elon Musk was a vocal critic of traditional auto industry discounts and has resisted the practice.

In the midst of rising inflation and a living crisis, Tesla spent most of 2022 jacking up the prices of their vehicles. Most auto industry experts say the recent slash in the price is a sign that Tesla is becoming a regular car company.

While this may not sit well with luxury brand consumers, it is a move that will definitely excite investors who watched the company’s market value crash to $349 billion from the $1 trillion it achieved in October 2021. For investors, any strategy that will lead to a rise in sales and market value numbers is welcomed.

The new price cut is coming a few days after a similar move in China sparked protests among drivers that recently completed their orders before the discount. Tesla Europe is trying to avoid a similar scenario by saying it will pass the discount to customers that have already ordered their vehicles.

Ives added that the discounts could lead to a 15% rise in the demand for Tesla EVs in the coming year. This is the fourth time the automaker is slashing the prices of its EVs or handing out credits since September 2022.

Price cut is a sign of an improving supply chain

Tesla recently opened its factories in Shanghai and Berlin which brought it closer to the necessary raw materials thereby helping to ease supply chain disruption. A spokesperson for Tesla Ireland and the UK said the lower price was due to lower production costs.

“Will the turbulent supply chain disruption year coming to an end, we are seeing the normalization of some of the cost inflation, giving us the confidence to pass the discounts to our customers,” the spokesperson said.

Fiona Howarth, the chief executive of Octopus Electric Vehicles, a leasing group said it is not a secret that the EV industry was struggling to fulfill orders. While she said she was delighted to see big names cut prices, she said it is up to suppliers to sustain the momentum.

Tesla lacks traditional dealerships like other automakers. Prices are set centrally and adjusted based on changes in demand and supply. 

On the night of Thursday 12 January 2023, Tesla announced price slashes on its most popular vehicles in Europe and the United States. The discounts range from 6% to 20% on the Model 3 and Model Y vehicles.

The new cut is coming at a time when Tesla’s United States vehicles recently qualified for additional $7,500 tax credit from President Biden’s Inflation Reduction Act. Once considered a luxury vehicle, the new price cuts bring most Tesla models closer to average buyers.

For example, the starting price of Model X went down by 9% while that of Model S slipped by nearly 10%. The starting price of the Model 3 is now $53,990—before tax credit. Also, the price of the long-range Model Y crossover dropped to $52,990. With such low prices, Tesla can now compete with other automakers entering the market en masse this year.

The new lower prices are significant because it allows customers to qualify for the federal tax incentive on new EV purchases. Under the new terms, only EVs with prices below $55,000 will qualify for the $7,500 tax credit established in the Inflation Reduction Act signed into law by President Biden in August 2022.

The price of Tesla’s Model 3 is now closer to GM’s Chevrolet Bold which starts at around $30,000. The Chevy Blazer EV is expected to debut this summer with a starting price of $44,995. Tesla’s price slash is bad news for Ford which recently hiked the base price of the F-150 Lightning electric truck from $40,000 to $56,000.

Dan Ives, a Wedbush analyst said Musk is playing a “strategic poker move”. According to Ives, Tesla is trying to defend its territory and retain the title of top seller of electric vehicles across the globe. 

“This is a clear message to European automakers and startups that Tesla is not going to play nice in the sandbox with an electric vehicle price war now underway,” Ives wrote.

Price cut is Tesla’s strategy to manage plunging demand

Apart from sparking an EV price war, Tesla’s price cut appears to be an attempt to revive the slowing demand for its technology-laden EVs. In the past, Elon Musk was a vocal critic of traditional auto industry discounts and has resisted the practice.

In the midst of rising inflation and a living crisis, Tesla spent most of 2022 jacking up the prices of their vehicles. Most auto industry experts say the recent slash in the price is a sign that Tesla is becoming a regular car company.

While this may not sit well with luxury brand consumers, it is a move that will definitely excite investors who watched the company’s market value crash to $349 billion from the $1 trillion it achieved in October 2021. For investors, any strategy that will lead to a rise in sales and market value numbers is welcomed.

The new price cut is coming a few days after a similar move in China sparked protests among drivers that recently completed their orders before the discount. Tesla Europe is trying to avoid a similar scenario by saying it will pass the discount to customers that have already ordered their vehicles.

Ives added that the discounts could lead to a 15% rise in the demand for Tesla EVs in the coming year. This is the fourth time the automaker is slashing the prices of its EVs or handing out credits since September 2022.

Price cut is a sign of an improving supply chain

Tesla recently opened its factories in Shanghai and Berlin which brought it closer to the necessary raw materials thereby helping to ease supply chain disruption. A spokesperson for Tesla Ireland and the UK said the lower price was due to lower production costs.

“Will the turbulent supply chain disruption year coming to an end, we are seeing the normalization of some of the cost inflation, giving us the confidence to pass the discounts to our customers,” the spokesperson said.

Fiona Howarth, the chief executive of Octopus Electric Vehicles, a leasing group said it is not a secret that the EV industry was struggling to fulfill orders. While she said she was delighted to see big names cut prices, she said it is up to suppliers to sustain the momentum.

Tesla lacks traditional dealerships like other automakers. Prices are set centrally and adjusted based on changes in demand and supply.