Home Market Analysis Tesla Slashes Prices Up To 20 Percent, Sending Shockwaves Through EV Industry

Tesla Slashes Prices Up To 20 Percent, Sending Shockwaves Through EV Industry

by WOOWinvest
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Tesla Slashes Prices Up To 20 Percent, Sending Shockwaves Through EV Industry

Key takeaways

Tesla’s price drops are officially cited as a drop in supply chain prices, but others think it’s a savvy sales ploy after a rough year The Model 3 and Model Y now fall into the US clean vehicle tax rebate, making Teslas cheaper than ever before Tesla sales are up in China, Europe and the US since the announcement

It’s been a rough ride in the last year for Tesla, the poster child for EVs. 2022 was the first year since it went public that the company saw billions wiped off its value.

So when Tesla announced last week that it was slashing the price of its electric vehicles (EVs) by up to 20%, eyebrows were raised. The move has caused anxiety among investors after a string of controversies surrounding its CEO, Elon Musk.

Other investors are seeing this as a sign that Tesla is ready to turn the stock price around.

But what exactly has been the effect on the EV market and Tesla stocks? Is this a clever marketing ploy that will put Tesla ahead of its competitors?

Either way, if you’re wanting to invest in companies like Tesla, without having to do the research yourself, you can always get AI to do the heavy lifting for you by investing in our Emerging Tech Kit.

What are the new Tesla prices for 2023?

All the Tesla models have seen a drop in price, some larger than others. The Model Y base unit is now priced at $52,990 down from $65,990 – nearly a 20% difference. As for the Model 3 Performance, it’s retailing at $53,990 down from $62,990.

The Model S Performance is the most expensive Tesla, and there’s $21,000 in savings if you’ve had your eye on one. It’s now down to $114,990 – over a 15% decrease in price.

Why has Tesla dropped their prices?

Tesla officials said the reason for the price drop was due to falling prices in the supply chain and logistics, so they could pass these savings on to the end user.

Some are skeptical about whether this statement holds the whole truth. CEO Elon Musk said last year that Tesla prices had become “embarrassingly high” when a recession was just around the corner.

While Tesla enjoys the lion’s share of the EV market in the US, the competition is rapidly growing. Ford’s EV sales make up nearly 8% of the market while GM’s are 3.5%. A price drop undoubtedly sets Tesla apart from its competitors.

Is Tesla in trouble?

Like many of the major US companies, Tesla has not been immune to the economic downturn. Tesla shares have dropped over two-thirds in price over the past year, trading at roughly $104 a share after the heady highs of $400 earlier in the year.

The controversy surrounding the CEO himself has not helped Tesla’s fortunes. Elon has been testifying in court this week over claims he was defrauding Tesla investors when he tweeted last year that he had enough funding to take the company private.

Everyone knows about Musk’s now-infamous purchase of Twitter, which has been steadily losing money after a series of layoffs and advertisers running for the hills. In December, Musk sold $3.6bn worth of Tesla stock to help fund the new venture.

There’s no denying the ill-fated takeover has been one of many distractions – and that’s concerning for investors.

How did the stocks fare?

Needless to say, the markets initially doubted this latest move. After the announcement, Tesla shares plunged 6.4%.

Crucially, the announcement puts the cat among the pigeons with Tesla’s competitors. GM and Ford’s stock prices fell 4.5% and 6% respectively. In Europe, Volkswagen AG dropped 3.6%.

As with anything that involves Elon Musk, the consensus from experts is divided on whether this was a good move for Tesla. On the ground, the reality with Tesla customers has been very different.

What’s the new federal tax credit on EVs?

In August last year, President Biden signed into law the Inflation Reduction Act. As part of this, the newly rebranded ‘clean vehicle credit’ for EVs is now available. This tax credit gives consumers $7500 back for buying a brand-new EV.

To qualify, buyers have to buy an EV that’s made in North America. There’s also a price limit on getting the rebate: for vans and pickup trucks it can’t be priced over $80,000 and for any other vehicle, the limit is $55,000.

There was another key change in the Act that affected Tesla. Before, once a manufacturer had hit 200,000 EVs sold it no longer qualified for the tax rebate. That’s now been repealed and is a major change to Tesla’s fortunes with potential customers looking to save money.

With this context, it makes a lot of sense that Tesla dropped its pricing. The newly reduced price of the Model Y means it is eligible for the tax credit, potentially boosting sales for 2023.

What’s been the effect?

The IRS was not able to get its guidance on battery composition over the line in time for the Act to be written into law. Because of this, there’s a possibility Tesla cars won’t be eligible for the full $7,500 rebate after March 2023, when the guidance is set to be released.

So, Teslas are effectively on sale. There’s nothing like a time limit to increase demand – and the effect has been immediate. In China, there was a 76% increase in daily sales from 9-15 January. Germany, home to Tesla’s Berlin gigafactory, has reported an increase in wait times for the Model Y.

In the US, online car resource Edmunds said the Model Y skyrocketed in searches by the week ending January 15, jumping from 70th to second place in the rankings. The Model 3 jumped 36 places to become the 11th most searched vehicle.

This is good news for Tesla, whose primary markets are the US and China. In 2021 roughly three-quarters of sales came from these two countries. Tesla will be hoping to reverse the recent slump in China, where it faces stiff competition from cheaper Chinese EV brands.

All of this new demand for Teslas has caused an uptick in stock prices. Tesla closed at nearly $144 yesterday (January 24), up from a low of $108 at the start of the year.

Will Tesla’s string of successes continue? With a CEO as controversial as Elon it’s hard to tell what might happen next – but it definitely won’t be boring.

The bottom line

Regardless of the day to day craziness that Elon Musk can bring, Tesla remains an exciting company at the forefront of advancements in EV technology.

After a major drop in price for Tesla and many other companies and tech, stocks are available at steep discounts to their prices from a year ago. Of course, there’s no guarantee that they’re going to bounce back, but many are confident about their prospects over the long term.

If you’re wanting to take advantage of these low prices, but you want a bit of a helping hand with the investment choice, why now harness the power of AI to help you?

Our Emerging Tech Kit invests across four tech verticals, tech ETFs, large cap tech stocks, growth tech stocks and cryptocurrencies via public trusts.

Every week our AI predicts how these are going to perform, and then automatically rebalances the Kit in line with projections. It means that as the landscape changes, your portfolio is kept up to date, without you having to lift a finger.

Download Q.ai today for access to AI-powered investment strategies.

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