Tesla has once again reduced the prices of some of its Model Y and Model 3 vehicles in the United States. This is the sixth time the company has cut prices this year as it aims to boost demand, even if it means sacrificing its industry-leading profit margins. However, the price reductions have caused the company’s shares to drop by nearly 3% in early trading ahead of Tesla’s first-quarter earnings announcement on Wednesday. Despite this, the shares have still risen by almost 50% this year, following their biggest annual drop in 2022.
Price Cuts and Models Affected
Late on Tuesday, Tesla’s website indicated that the price of the Model Y ‘long range’ and ‘performance’ vehicles had each been cut by $3,000, while the Model 3 ‘rear-wheel drive’ has been reduced by $2,000 to $39,990. So far this year, Tesla has cut the prices of its base Model 3 by 11% and its base Model Y by 20%. The United States, which is Tesla’s largest market, is also set to introduce stricter standards that will limit EV tax credits, which has further encouraged Tesla’s discount drive.
International Price Cuts
Tesla has also lowered prices in Europe, Israel, and Singapore, as well as Japan, Australia, and South Korea, since it began its discount drive in China in January. Despite these price cuts, the company has reported only a 4% sequential rise in first-quarter deliveries, significantly lower than the 17.8% sequential climb in the previous quarter. As competition increases from rivals such as Ford Motor and Tesla play catch-up with BYD in China, its second-largest market, several analysts predict that further price cuts are on the horizon.
Safety Weaknesses at Tesla Factory
Recent news reports have uncovered that government inspectors determined that Tesla’s factory in Shanghai, where an employee died in a workplace accident on February 4, has safety shortcomings. According to reports, the emergency bureau of Shanghai’s Pudong district suggested an unknown punishment for Tesla. The report was posted on the government’s website but was removed on Wednesday, as Tesla reportedly asked for it to be taken down due to the presence of pictures of its production process. The investigation determined that the employee who died had not followed safety protocols and did not secure a safety gate. This incident is likely to increase scrutiny of Tesla’s safety practices, which could impact the company’s reputation and stock value.
Impact on Tesla
While the price cuts may encourage more sales and demand, it remains to be seen how it will affect Tesla’s profitability, which has already been hit by increased competition and supply chain disruptions caused by the pandemic. The reduction in prices also highlights Elon Musk’s willingness to compromise the company’s profitability for the sake of demand. However, with Tesla’s upcoming earnings announcement and the increased scrutiny of the company’s safety measures, the next few months could prove to be a challenging time for the electric vehicle manufacturer.
