A price cut was announced by Tesla for its vehicles in the United States, including Model Y and Model 3. This becomes the sixth price cut this year to take advantage of the demand, especially as competition heats up in the EV market.
(Photo : Scott Olson/Getty Images)
SCHAUMBURG, ILLINOIS - APRIL 19: A sign marks the location of a Tesla dealership on April 19, 2023 in Schaumburg, Illinois. Tesla announced price cuts for its Model 3 and Model Y electric vehicles in front of their 1st quarter earnings report due out today.
Reducing Prices
Tesla is cutting prices for its Model Y and Model 3 vehicles in the United States to keep up with the demand in the market. According to a report from Bloomberg, the company's most popular vehicles will start under $40,000 before incentives for the first time in years.
This comes just ahead of its latest earnings report, which shows the willingness of Chief Executive Officer Elon Musk to sacrifice profitability over demand. Both vehicles are be marked down by $3,000, which will cut the costs of the base Model 3 by 4.7%.
Compared to its original starting prices, Tesla's two high-volume vehicles are now much lower after several rounds of price cuts. The base Model Y is now 29% cheaper while Model 3 is now 15%. Musk replied in a tweet last Sunday and said, "We're not 'starting a price war', we're just lowering prices to enable affordability at scale."
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One of the company's disadvantages is competitors attract buyers with newer models as Tesla has not updated its lineup for quite some time now. To maintain its standing, the company implemented a series of price cuts this year across its four models.
The latest price cuts mark Tesla's second in the US and sixth globally after several quarters of falling short in deliveries from analysts' expectations. Tesla is trying to keep up with other EV makers, including Ford Motor Co., Rivian Automotive Inc., and Lucid Group.
Aside from the local price cuts, Reuters reported that Tesla also lowered its prices in Europe, Israel, Singapore, Japan, Australia, and South Korea to expand a discount drive the company started in China last January.
The company has also been able to lead against the large US and Japanese automakers. However, Chinese automakers have entered the market, starting to take the lead in the market as they offer lower-cost offerings.
Falling Short in Profit
The New York Times reported that Tesla's profit dropped in the first three months of the year, despite having several price cuts in the first quarter. The company said on Wednesday that it had made $3.5 billion in the first quarter, which is much lower than the $3.7 billion of last year's Q1 Earnings report.
Last year, the company sold more electric vehicles in the country than all its competitors combined. But there has been a struggle to achieve this record as existing traditional makers have started to enter the EV market, including General Motors, Ford Motor, and Volkswagen. Tesla has also been overtaken by a company named BYD in China.
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