Electric vehicle giant Tesla has just reduced the prices of its models over the past few weeks amid waning demand and an intensifying price war. According to Reuters, the coverage of the price cuts includes the US, China, and Germany.
Recent price cuts
Tesla lowered the prices of three of its five electric vehicle offerings in the US market on Friday. After that, it expanded the price cuts to its other key markets, including China and Germany.
For starters, Tesla reduced the prices of its top-selling electric vehicle in the US. The Tesla Model Y electric crossover now starts at only $42,990. The Tesla Model S and Model X also became less expensive at $72,990 and $77,990, respectively.
In China, the Musk-led company cut the base price of its updated Tesla Model 3 electric sedan by $1,930 (14,000 yuan) to $32,000 (231,900 yuan).
As for the German market, Tesla also lowered the prices of its Model 3 RWD to €40,990 ($43,670.75) from €42,990. Apart from these three key markets, the American EV maker also launched notable price cuts in other countries in Europe, Africa, and the Middle East.
Factors driving Tesla’s price cuts
Tesla’s price cuts came after the company reported weak electric vehicle delivery performance in the first quarter of the year, falling for the first time in almost four years.
According to The Guardian, Tesla shares dropped under $150 last week. In effect, it erased all gains the Musk-led company made in 2023.
Tesla also recently announced a layoff affecting 10% of its global workforce or approximately 14,000 jobs. Moreover, Tesla also had to issue a safety recall for the all-electric Cybertruck over an accelerator pedal defect.
“This is another black eye for Tesla, which has added to the chaos going on for Musk. Cybertruck is the pedestal moment and a recall out of the gates is a bad look.”
Wedbush Securities Senior Equity Analyst
CEO Musk responds to criticism about Tesla’s pricing strategy
Omar of Whole Mars Blog shared on social media platform X that he sees Tesla’s aggressive pricing strategy as incoherent. TSLA investor Sawyer Merritt also said that such changes in pricing were among the rare disadvantages of the direct-to-consumer sales model, despite the pricing transparency.
“I think that if you had a monkey throw shit at a keyboard to come up with a pricing strategy for Tesla it would be more coherent than what we’ve seen. Subscription price will go up once we release FSD. Actually we will cut it. We are raising Model Y prices. Actually now we are lowering them.
It’s amusing to follow, but probably confusing to consumers. Should I buy FSD now because the price was cut? Or should I wait for the next FSD price cut and save thousands of dollars?”
Whole Mars Catalog (Supervised) on X
The discussion on X caught Tesla CEO Elon Musk’s attention yesterday. According to the Tesla boss, the dealership sales model cannot match the direct-to-consumer model’s level of transparency. He noted that MSRPs of the electric vehicles are often higher than their actual price.
CEO Elon Musk also noted that the price cuts are necessary for the company to match its production with the demand.
“…Tesla prices must change frequently in order to match production with demand.”
Tesla CEO Elon Musk
The recent price cuts are crucial for Tesla to stimulate demand amid the slower-than-expected uptake that affects all electric automakers not only in the US but globally. This pricing strategy will also significantly help Tesla to remain competitive against Chinese rivals’ cheap electric vehicle offerings.
