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Tesla’s big price cuts mean ‘a major shift in the EV market’

Can Tesla continue to be the leader in the modern electric vehicle market it has effectively created?

That question has been on the minds of electric vehicle buyers, investors, analysts, industry watchers and Elon Musk dieters for months. That was especially true when questions about demand in China and the US — not to mention the Twitter drama — seemed to cast a shadow over the electric carmaker’s success story.

On Thursday night, Tesla revealed its answer to this problem, at least for now: hefty price cuts on its range of cars, in some cases as much as 30 percent off when the latest EV tax credits are also applied.

Can Tesla continue to be the leader in the modern electric vehicle market it has effectively created?

In addition, some of the price reductions now qualify the cars for those tax breaks in the first place.

Analysts who spoke The edge stressed the importance of these cuts on Friday, saying they could have profound implications not only for Tesla’s brand, but also for the increasingly competitive EV game. Some even said this could be the first shot in an impending “price war” for EVs, even as automakers struggle to source enough materials to get these cars onto the road en masse.

“Tesla’s latest price cuts reflect a major shift in the EV market,” said Jessica Caldwell, the executive director of insights at car buying website Edmunds. “A wave of new EV options will hit the market in 2023, but given that production will be limited for most manufacturers, Tesla is positioning itself to serve consumers who don’t want to wait or who may be hesitant about EV technology, by enticing them with one thing that all buyers respond to: a deal.”

Prospective Tesla customers will likely be very pleased with Thursday’s news. For example, the Model 3 Performance fell from nearly $63,000 to $54,000 before tax credits. The Model Y Performance is down from nearly $70,000 to about $57,000 even before the tax credits.

“Tesla’s latest price cuts reflect major shift in EV market”

“The changes to be aware of are especially for the Model Y, with some configurations dropping MSRP by as much as $13,000, a really staggering discount that you rarely see happen in this industry,” said Robby DeGraff, an analyst at the automotive industry. research firm AutoPacific. “In addition, these more accessible pricing means that certain configurations of the Model 3 and Model Y, routinely two of the country’s best-selling EVs, should now be eligible for further discounts of up to $7,500 thanks to the revised federal EV tax credits. ”

Tesla’s price cuts have pushed the automaker’s offerings far below that of several competitors. In particular, the Model 3 Standard Range is now a lot closer the long promised but never realized $35,000 Model 3 than ever before.

The price cuts follow a similar move last week in China. There, Tesla slashed its prices by as much as 13 percent, its third such move in recent months, as it battles for EV supremacy with homegrown automakers like BYD.

In the US, the move was also timed to coincide with EV tax relief changes under the Inflation Reduction Act. That legislation encourages tax breaks for EVs assembled in North America, as well as batteries assembled here.

Caldwell said the cuts, which are designed to protect Tesla’s market share, also represent the transition from a “market anomaly” to a mainstream auto company. The the average new EV price was around $65,000 by the end of 2022even higher than the astronomical new prices of combustion engine cars lately.

Tesla’s price cuts have pushed the automaker’s offerings far below that of several competitors.

It’s a way to stay ahead of the competition. Caldwell said that for a long time Tesla was in fact the only EV manufacturer in the US not making “compliance vehicles” – expensive, low-range converted electric vehicles that were made to comply with local regulations. “But now Tesla needs to be competitive in multiple areas, including price, design and performance,” she said.

That will prove increasingly difficult in 2023. This year, all major car manufacturers and several start-ups are jointly planning a new EV attack, almost all of which boast impressive vehicle range, advanced features and an unprecedented level of software integration.

While Tesla’s car lineup is more than competitive in those areas, it’s one that’s getting old; the Model S is now 10 years old this year, while the top-selling Model 3 is six years old. And Tesla appears to have little-known all-new products in the immediate pipeline alongside the long-delayed Cybertruck and Roadster.

At the same time, as another Edmunds analyst told The edge in December, discounts are often a feature of less premium, more budget-friendly brands; Nissan in particular has been struggling for years with the effects of this strategy.

“Tesla needs to be competitive in multiple areas, including price, design and performance”

“Like mainstream automakers, Tesla will have to contend with what these price cuts will mean for resale value and brand image,” Caldwell said.

In addition, many existing Tesla customers — including those who paid more for the same vehicles they bought in December — appear unhappy with the move, fearing the impact on the resale value of their cars. Many took to social media on Friday, including Twitter, the platform Musk personally owns, to complain or request discounts on other services.

“However, there seems to be a drama unfolding among shoppers that only bought these exact Tesla vehicles, at a higher cost, before these dramatic price drops were announced, things could get ugly and Musk might have to figure out a way to put out those fires,” DeGraff said.

Meanwhile, Tesla owners in China have taken to the streets to protest last weekend’s and this week’s price cuts, saying the decision has negatively impacted their resale value. While customers in the US and Europe are unlikely to go that far, one group of people was quite happy with this decision: Tesla’s long-term investors.

“While the initial reaction to these cuts will of course be negative [Wall] Street at first, we believe this was the right strategic poker move by Musk and his company at the right time,” said Dan Ives, a technical analyst at Wedbush Securities who is bullish on Tesla but who has been highly critical of it in recent times. Musk’s actions. months.

“We believe all of these price cuts could boost global demand/supply by 12 to 15 percent by 2023 and show that Tesla and Musk are going on the ‘offensive’ to boost demand against a weakening backdrop,” said Ives. “This is a clear shot across the bow to European automakers and American stalwarts (GM and Ford) that Tesla isn’t going to play nice in the sandbox with an EV price war now underway.”

As with most deals in life, there seems to be at least one catch. While the new rules regarding the EV tax credit are vague, evolving and sometimes deeply confusing, many observers have pointed out that the full benefit of these rebates — the price reductions and the tax credits combined — is contingent upon receipt of a Tesla before March 31. That’s when the rules around battery sourcing will change.

Unless something changes with the tax cuts, which most likely could, these deals are contingent on Tesla’s ability to deliver cars that meet the demand that has emerged over the past 24 hours.

Shreya has been with australiabusinessblog.com for 3 years, writing copy for client websites, blog posts, EDMs and other mediums to engage readers and encourage action. By collaborating with clients, our SEO manager and the wider australiabusinessblog.com, Shreya seeks to understand an audience before creating memorable, persuasive copy.

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