Tesla, the poster child for electric vehicles, has had a difficult year. The company’s value was wiped out by billions in 2022, the first year since it went public. So when Tesla announced last week that it was lowering the price of its electric vehicles (EVs) by up to 20%, it raised eyebrows. Following a string of controversies involving its CEO, Elon Musk, the move has caused investors concern.
Other investors see this as a sign that Tesla is ready to reverse its stock price decline. All Tesla models have seen price reductions, some larger than others. The Model Y base unit is now $52,990, down from $65,990, a nearly 20% reduction. The Model 3 Performance now costs $53,990, down from $62,990.
The Model S Performance is Tesla’s most expensive model, and there’s a $21,000 savings if you’ve been eyeing one. It’s now down to $114,990, a 15% reduction in price. Tesla officials stated that the price decrease was due to lower supply chain and logistics costs, which allowed them to pass these savings on to the end user.
Elon Musk, CEO of Tesla, stated last year that the company’s prices had become “embarrassingly high” at a time when a recession was looming.
Tesla’s decision last week to slash global EV prices by up to 20% could attract new buyers to the industry, but it will also force other automakers to respond with lower prices or risk being left behind, analysts and investors said. And, like many other major US corporations, Tesla has been affected by the economic downturn. Tesla shares have dropped by more than two-thirds in value over the last year, trading at around $104 per share after reaching all-time highs of $400 earlier this year. Everyone is aware of Musk’s now-infamous purchase of Twitter, which has been steadily losing money following a series of layoffs and advertisers fleeing. Musk sold $3.6 billion in Tesla stock in December to help fund the new venture.
In addition, President Biden signed the Inflation Reduction Act into law in August of last year. The newly rebranded ‘clean vehicle credit’ for EVs is now available as part of this. This tax credit reimburses consumers $7500 for purchasing a brand-new EV. Buyers must purchase an EV made in North America to qualify. There is also a price limit for receiving the rebate: vans and pickup trucks cannot be priced higher than $80,000, and any other vehicle cannot be priced higher than $55,000.
Another significant change in the Act impacted Tesla. Previously, once a manufacturer sold 200,000 EVs, it was no longer eligible for the tax credit. This has now been repealed, which represents a significant change in Tesla’s fortunes with potential customers looking to save money. So it makes perfect sense for Tesla to lower their prices.
From January 9 to 15, daily sales in China increased by 76%. Germany, home to Tesla’s Berlin gigafactory, has reported an increase in Model Y wait times. According to Edmunds, an online car resource, the Model Y skyrocketed in searches by the week ending January 15, jumping from 70th to second place in the rankings. The Model 3 moved up 36 spots to become the 11th most searched vehicle. Stock prices have risen as a result of the increased demand for Teslas. Tesla closed yesterday (January 24) at nearly $144, up from a low of $108 at the start of the year.
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