Elon Musk’s Tesla continues to cut prices of its electric vehicles, amid slowing demand and huge share price decline
Tesla continues to respond to slowing consumer demand for its electric vehicles, amid a worsen economic situation around the world.
After recently cutting prices in China in response to slowing demand in that key market, Tesla is now cutting the price of its EVs (electric vehicles) in markets such as the US, UK and Europe.
This comes amid of a backdrop of Tesla’s depressed share price, which has fallen by 65 percent in 2022 and fell 54 percent in the final quarter alone as investors became increasingly worried that Elon Musk is focusing too much on the reorganisation of Twitter.
Indeed, Tesla’s market value has fallen by more than two-thirds from more than $1.2 trillion in November 2021, to less than $400bn currently.
Last week in China it had emerged that Tesla had abruptly cut its EV prices in that country, following an earlier round of price reductions in October 2022.
Tesla took the decision in response to the slowing demand in China, and cut prices for its Model 3 and Model Y cars by up to 9 percent in China, and offered insurance incentives.
But last week’s second price reductions left many Tesla owners in China angry at missing out on the price cuts.
As a result, hundreds of angry Tesla buyers in China gathered at the electric carmaker’s showrooms and distribution centres across the country to protest about missing the price reductions.
Posts on Chinese social media showed crowds of vehicle owners at stores and distribution centres in Shanghai, Chengdu, Shenzhen and other cities.
Car owners ransacked a Tesla Experience Centre in Chengdu in the southwestern Sichuan province and posted a handwritten list of demands signed with names and fingerprints, according to videos circulating on social media.
The requests included warranty extensions of two to four years and rebates for using the firm’s Supercharger charging stations.
In another video buyers sang the national anthem inside a Tesla store, while a video from Changsha in Hunan province showed people chanting, “Return the money, refund our cars.”
A video that appeared to be filmed in Beijing showed police arriving to disperse protesters in front of a Tesla store.
About 200 recent buyers of the Tesla Model Y and Model 3 reportedly gathered at a Tesla delivery centre in Shanghai to protest over the matter.
Western price cuts
Now Tesla is applying similar price reductions for customers in Western markets.
Late last week the Guardian reported that Tesla had cut prices by up to a fifth in US, UK and Europe as it contends with slowing demand and increased competition.
The price of the cheapest Model 3 saloon car, the rear-wheel drive version, dropped by £5,500 to £42,990, the Guardian noted.
The cheapest Model Y crossover dropped to £44,990, although the biggest cut was applied to the most expensive Performance version, which dropped by £8,000 to £59,990.
In the US the entry-level version of its Model Y now costs $52,990 (£43,526), down from $65,990 – a 20 percent drop that will mean the vehicle qualifies for US tax credits, the Guardian reported.
The Model 3 dropped to $43,990 in the US, a $3,000 reduction.
A Tesla spokesperson told the Guardian that the Elon Musk firm had seen “a normalisation of some of the cost inflation” after “a turbulent year of supply chain disruptions” which allowed it to cut costs for customers.
But the Guardian reported that Dan Ives, an analyst at US investment bank Wedbush, as saying that the US and European price cuts were “eye-popping” and that investors would probably respond negatively. He added that an “EV price war” between manufacturers was now under way.
However, he said it was the “right strategic poker move by Musk”, and that the cuts could increase deliveries by between 12 and 15 percent.
Meanwhile Ginny Buckley, chief executive of car website Electrifying.com, was quoted by the Guardian as saying that Tesla buyers who took delivery in recent months would be “less than impressed by the move, which could ultimately undermine confidence in the company”.
“Carmakers will usually carefully manage prices and incentives to avoid crashing used values and upsetting customers,” she said.
Just after Christmas 2022 it was reported that Tesla planned to run its key Shanghai plant on a reduced schedule in January 2023, continuing its reduced production that began earlier in December.
The Shanghai plant, with about 20,000 workers, accounted for more than half of Tesla’s production for the first three quarters of 2022.
Earlier this month Tesla revealed it had shipped a record 1.3 million vehicles last year, a 40 percent increase from the previous year, but it had missed analysts’ expectations.