Elon Musk-owned Tesla is offering bumper discounts. For the fifth time since January, the electric vehicle maker has slashed the prices between two per cent and nearly six per cent. The continuation of the discount drive in Tesla’s largest market could hurt profitability, the experts have cautioned.
According to Tesla’s website, the cuts ranged from two per cent on the Model 3 performance version to nearly six per cent on the basic version of Model S. The company also slashed $2,000 off the price of Model Y – its most popular small SUV, adding a lower-cost dual-motor version at $49,990.
Cumulatively, Tesla has reduced the price of its base Model 3 by 11 per cent since the beginning of the year while Model Y has witnessed an even steeper 20 per cent reduction.
US prepares to adopt tougher standards
The move comes at a time when the US government is preparing to adopt tougher standards that may limit EV tax credits. Tesla earlier this month said the Model 3 rear-wheel drive credit will be reduced as a result of the guidance.
The Biden administration is expected to publish a revised list of qualifying models and tax credit amounts later this month.
Industry experts said Tesla needs to sell more vehicles to keep its factories operating at full capacity as the overhead of underutilised plants can quickly eat into the profit margins. Before the tax credits evaporate, this is the opportunity to let the cars fly out of the Tesla factory shelves.
Moreover, with more and more players jumping on the EV bandwagon, Tesla’s novelty factor may have worn off which explains the aggressive price cuts.
Tesla’s sales numbers
According to sales figures released earlier this month, Resla, which doe not break out sales by country said the deliveries rise 36 per cent last quarter to 422,875.
The numbers were significantly higher than the 310,000 deliveries recorded a year ago but it still fell short of analyst estimates of 432,000. Despite missing the target, the company has set an ambitious goal of hitting 1.8 million deliveries this year.
Apart from the USA, Tesla made news last month when it triggered a price war among the electric carmakers in the hyper-competitive Chinese market by announcing a 50 per cent reduction in prices.
(With inputs from agencies)
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