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Tesla slashes US and European prices to spur sales

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Electric vehicle maker Tesla is cutting prices in the United States and across Europe again, according to listings on the company’s website late Thursday.

tesla did not respond to a request for comment on what prompted it to cut prices this week.

However, the U.S. move could help Tesla qualify for more federal EV tax credits and increase sales volume here and abroad after rising competition and interest rates.

In Europe, Tesla cut prices on its Model 3 and Model Y vehicles in Austria, France, Germany, the Netherlands, Norway, Switzerland and the United Kingdom.

Reuters reported that in Germany, Tesla cut Model 3 and Model Y prices from 1% to around 17%, depending on the configuration. Tesla’s Model 3 was the best-selling electric vehicle in Germany in December 2022, followed by the Model Y. volkswagen and its popular ID.4 electric vehicle in Germany.

Tesla’s Model 3 at its discounted price is comparable to Volkswagen’s entry-level electric car, the ID.3.

According to independent EV industry researcher TroyTeslike, the price of a new Tesla Model 3 in the US has dropped between 6% and 14%, depending on the configuration, and the cost of the Model Y has dropped by around 19%, also depending on the settings .

The Model 3 is Tesla’s entry-level sedan. The Model Y is categorized by some as a sport utility vehicle and by others as a crossover. The company has also lowered prices on its most expensive vehicles, the Model S sedan and the falcon-wing Model X SUV in the United States.

Generally, EVs qualify for US tax credits depending on the form factor or category they fall into, their efficiency and range (i.e., the number of miles they can travel on a fully charged battery), as well as price. retail price suggested by the manufacturers. .

The US government has delayed establishing new rules on the supply of raw materials and battery components to qualify automakers for a $7,500 tax credit for clean vehicles until at least the end of March 2023.

That means Tesla — and other EV makers — can buy critical parts and minerals from suppliers around the world for now and still qualify for some EV subsidies. Those seeking to qualify for federal grants must complete final assembly of their electric cars in North America, under current interim rules.

Tesla’s latest round of discounts could set the company up to reap the benefits of EV tax credits in both the short and long term. But it also risks upsetting customers who have just taken delivery of new Tesla electric cars before the end of 2022 at higher prices.

Earlier this month, Tesla angered customers in China by slashing prices on its Model 3 and Model Y cars after many agreed to accept deliveries at higher prices before Dec. 31. Some of the customers protested and demanded discounts, but so far, Tesla has not relented, according to a Reuters report.

In late December, Tesla discounted its Model 3 and Model Y cars by about $7,500 to entice customers to take deliveries before the end of the fourth quarter. Tesla also offered some US customers 10,000 miles of free charging (at Tesla supercharging stations) if they agreed to take delivery before the end of the year.

Despite the discounts, in the fourth quarter of 2022, Tesla reported deliveries of 405,278 vehicles and production of 439,701 vehicles. The company had been telling shareholders it expected 50% annual growth in vehicle deliveries over a multi-year horizon, but it fell short of that annual target and analyst expectations in the fourth quarter.

Tesla now operates its first US vehicle assembly plant in Fremont, California, a newer one in Austin, Texas, its first overseas factory in Shanghai and a newer one in Gruenheide, Germany.

The company’s production capacity is expected to be much higher in 2023 than in previous years with these factories, but bearish analysts have expressed concern about a possible “demand cliff”.

Tesla now faces more competition, higher interest rates and slower consumer spending than it has in years, Bernstein analysts wrote in a Jan. 12 note.

They said: “We believe many investors underestimate the magnitude of the demand challenges Tesla is facing.” However, the company had an “underperforming” rating and $150 price target on Tesla stock after the company’s stock price has plummeted in recent months.

CEO Elon Musk sold billions of dollars worth of his Tesla stock last year, in part to fund a leveraged buyout of Twitter for around $44 billion. Since taking over Twitter and naming himself CEO in late October, Musk has split time and resources between his social media business and his electric car company.

Tesla plans to report its fourth quarter 2022 results on January 25, 2023 and is expected to share its new outlook for the year ahead.

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