Tesla, the leader in electric vehicles, has announced discounts on certain Model Y electric vehicles available on its U.S. website. Customers can now save almost $3,000 on their purchases. For example, a long-range Model Y with a list price of $56,490 can now be purchased for $53,670. Smaller discounts are also available, with some Model Ys listed for $50,430 being sold for the same price.
The exact number of affected cars is unknown as Tesla has not provided any comment regarding this matter.
Despite the price cuts, Tesla’s stock has not been negatively impacted. In premarket trading, Tesla shares are up 0.8%, while S&P 500 and Nasdaq Composite futures show increases of 0.2% and 0.3%, respectively.
This move by Tesla is part of a broader trend in the electric vehicle market. As demand for EVs slows down and competition increases, companies have resorted to price cuts and discounts. In fact, some versions of the Model Y are now $17,000 cheaper than they were in the previous year.
While lower prices may attract more customers, they have also affected Tesla’s profit margins. In the third quarter of 2023, the company’s operating profit margins dropped below 8%, compared to 17% the previous year. This decline was due to the decrease in the average price realized for each vehicle, which fell by approximately $10,000 to $44,000.
Despite the impact on profit margins, the price cuts have resulted in higher sales volume for Tesla. In the first nine months of 2023, the company delivered around 1.3 million units, surpassing the approximately 900,000 units sold during the same period in 2022.
Will Price Cuts Come to an End for Tesla?
Investors have been hoping for a reversal in the cycle of price cuts, and there have been some signs of progress. Recently, certain versions of the Model Y saw their prices increase by $500. While this move doesn’t entirely extinguish hope, it does provide some respite. It’s important to note that these changes aren’t exactly price cuts – they are more like incentives to entice buyers. This strategy is commonly employed by dealers, and in the case of Tesla, they are both the dealer and the automaker. This sets them apart from other auto manufacturers, like Ford Motor (F), who operate through independent dealerships.
Additionally, the average transaction price for a Tesla vehicle in the U.S., inclusive of any incentives, is on the rise once again. According to data from Kelly Blue Book, average transaction prices increased by about 5% in October compared to September. This marks the first month-over-month increase in 2023.
In October, the overall industry incentives accounted for approximately 5% of the purchase price, which is higher than the previous year but still lower than historical norms, as stated by the automotive data provider.
The average price of a new car in October hovered around $48,000, experiencing a slight decrease compared to the previous year. This decline in prices, coupled with increased incentives, can be attributed to rising interest rates that impact monthly payments.
These developments highlight how the automotive industry is grappling with the effects of an economic slowdown, and Tesla is not immune to these influences either.
