Tesla has cut prices on most of its electric cars in the United States and Europe by as much as 20 per cent in a bid to spur slackening demand.
In New Zeland, Tesla cut
Not the only game in town anymore. Photo / Getty Images
Tesla has cut prices on most of its electric cars in the United States and Europe by as much as 20 per cent in a bid to spur slackening demand.
In New Zeland, Tesla cut the starting price of its cheapest car, the Model 3 by 7 per cent from $76,200 to $70,900, while the starting price of the Performance version of the Model 3 was reduced by the same percentage, taking it from $108,900 to $100,900.
The automaker faces increasingly stiff competition in the global market for electric vehicles. It also must contend with rising interest rates in the United States, which have increased the cost of financing vehicle purchases.
“I think Tesla recognizes they are not the only game in town and the Detroit companies are jumping into the deep end with EVs,” said Dan Ives, a Wedbush analyst. “I think the price cuts mean Tesla is going to rip the Band-Aid off and try to go on the offensive.”
Tesla stock fell sharply in early trading Friday after the price cuts were reported, but ended the day less than 1 percent lower. The share price has fallen roughly 70 per cent since November 2021.
The cuts will allow some of Tesla’s lower-priced models, depending on optional features, to qualify for federal tax credits of US$7500 that were made available starting on January1 under the Inflation Reduction Act. The credit is available on electric cars priced under US$55,000 ($86,300; in New Zealand, the Clean Car Discount of up to $8625 applies to cars that cost less than $80,000.)
Tesla has enjoyed rapid growth for the last decade but now must contend with a variety of challenges, including concerns that its chief executive, Elon Musk, is too preoccupied with Twitter, the social media platform he acquired last year for US$44 billion.
Musk has sold billions of dollars of Tesla stock to finance the Twitter acquisition, which has depressed Tesla’s stock price, and he has come under fire for firing a large portion of Twitter’s employees. He has also aired polarising political views on the social media platform — including several messages that appeared to support Russia in its war against Ukraine — that have hurt his and Tesla’s reputation with some consumers.
Tesla is not alone in dealing with slowing sales. US auto sales fell about 8 per cent last year to fewer than 14 million cars and trucks, the lowest level since 2011, mainly because shortages of computer chips prevented manufacturers from producing as many vehicles as consumers wanted to buy. In addition, rising borrowing rates made customer financing more expensive.
Sales of electric vehicles, however, rose 66 per cent to more than 808,619, according to Kelley Blue Book, a market researcher, as EVs grew from 3 per cent of the total market in 2021 to 6 per cent in 2022. (In NZ, total new vehicle registrations rose 3.8 per cent to a record 116,445 in 2022, with sales of pure EVs more than doubling to account for 14 per cent of the market.)
Full-year 2022 sales
— Chris Keall (@ChrisKeall) January 10, 2023
Pure electric: 16,223 (2021: 6897)
Plug-in hybrid: 7259 (2482)
Hybrid: 17,621 (13,794)
And while Tesla continues to dominate the segment, several automakers are gaining ground. Ford, Volkswagen and several other automakers posted sizable increases in EV sales last year and offer many models that were significantly more affordable than Tesla’s. Hyundai and its affiliate Kia together sold more than 43,000 electric vehicles in the United States in 2022, up from a just few hundred in 2021.
Total vehicles retailed with some form of electrification in their drivetrain grew by 77% from 23,173 units in 2021 to 41,103 units in 2022.
— Chris Keall (@ChrisKeall) January 10, 2023
Total new vehicle registrations up 3.8% to a record 116,445 (so electric = 35% of new sales, pure electric 14%)
New competitors are on the way, too. This year, General Motors is supposed to start making electric versions of its Chevrolet Silverado pickup and Chevrolet Blazer and Equinox sport utility vehicles.
Tesla has also had trouble in China, its largest market, where a local manufacturer, BYD, is now the No 1 electric vehicle brand. Tesla recently lowered prices in China and reported a global sales total for 2022 that was below analysts’ expectations.
While still hailed for the advanced technologies it packs into its cars, and their sleek styling, Tesla has been slow to add to its model line. It offers only four vehicles, and two are luxury models out of reach of most mainstream consumers. It last introduced a car in 2020, when the Model Y went into production.
Since 2019, Tesla has promised to introduce a pickup, called the Cybertruck, but has delayed its production several times. The company now hopes to begin making it this year. The Cybertruck has an angular, futuristic design and is expected to be sold as a luxury vehicle, which could limit its appeal. In the past, Musk has expressed a desire to produce an electric car that can sell for around US$25,000, but he has laid out no formal plans.
In December, Tesla began delivering a small number of battery-powered semi trucks to PepsiCo, its first customer.
“We see demand problems remaining until Tesla is able to introduce a lower-priced offering in volume, which may only be in 2025,” Toni Sacconaghi, a Bernstein analyst, said in a report this month.
In cutting the prices of its current models, Tesla is indicating that it is willing to concede some profit in order to increase sales volume. The company typically shows gross profit margins of 26 per cent — more than double that of some rival automakers — a factor that led investors to bid up its stock, making it the world’s most valuable car company.
Written by: Neal E. Boudette
© 2023 THE NEW YORK TIMES
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