Tesla Cuts Price On US Electric Cars

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Tesla's Model 3. Credit: Tesla

Demand for electric vehicles not so great? Leading manufacturer cuts price on all models

Tesla has cut prices on all of its models in the United States, which suggest demand for electric cars is not as high as previously forecast.

Tesla is supposedly cutting the prices by $2,000 for each car, in an effort to offset a reduction in a federal tax cut for buyers of the electric vehicles.

Up until July 2018, Tesla buyers were entitled to a tax credit of $7,500 for purchasing a plug-in electric car. However that ended last summer when Tesla reached the milestone by selling more more than 200,000 plug-in vehicles.

Tax credit

Shares in the electric car market fell nearly 7 percent, Reuters reported, on worries of future profitability.

This price cut also led analysts to speculate whether the price cut was also down to lower demand in the United States for green cars.

There was also concern what the move means for Tesla’s profitability in the years ahead, especially considering the firm has never posted an annual profit.

“In our view, this move could suggest that what many bulls assume to be a substantial backlog … for Tesla may be less robust,” Bank of America analyst John Murphy was quoted by Reuters as saying.

Before Tesla sold 200,000 cars, buyers gained a tax credit of $7,500 for purchasing a plug-in electric car. But starting this year on 1 January, Tesla buyers will only get $3,750 for the next six months.

In July the tax credit will halve again to $1,875, before being withdrawn altogether in 2020.

Reuters said that Tesla delivered 63,150 Model 3s in its fourth quarter, falling short of FactSet estimates of 64,900.

EV demand

The move has thrown a spotlight on consumer demand for electric vehicles (EVs).

And research from Kantar’s Insights Division, which surveyed 20,000 consumers living in urban areas across Europe, Asia, Africa and the Americas, found that electric vehicles are currently the least likely car for a consumer to buy in most markets.

Kantar’s data shows that 50 percent of consumers would consider petrol, 35 percent diesel, 32 percent hybrid, 20 percent biofuel/ flex fuel, 16 percent an LPG/ Natural Gas and just 15 percent an electric vehicle.

Kantar’s data also showed that the key obstacles to electric vehicles uptake are the lack of convenient charging stations (53 percent); a lack of information or understanding about an EV (49 percent); a lack of model choice (45 percent); concern at the purchase price as 52 percent of EVs cost more than petrol models; and ‘range anxiety’ about the batteries.

Other consumer concerns about EVs centre about lengthy recharge times, and a poor perception of the driving experience.

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Author: Tom Jowitt
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