Tesla vehicles
Tesla vehicles at a sales and service center in Vista. REUTERS/Mike Blake

Tesla has slashed prices globally on its electric vehicles by as much as 20%, extending an aggressive discounting strategy and challenging rivals after missing Wall Street delivery estimates for 2022.

The move, which prompted a 5.6% fall in Tesla’s shares, came after CEO Elon Musk warned that the prospect of recession and higher interest rates meant it could lower prices to sustain volume growth at the expense of profit.

Musk acknowledged last year that prices had become “embarrassingly high” and could hurt demand.

The lower pricing across the U.S., Europe, Middle East and Africa, following a series of cuts last week in Asia, marks a reversal from the strategy the automaker had pursued through much of 2021 and 2022 when new vehicle orders exceeded supply.

The U.S. price cuts on its global top-sellers the Model 3 sedan and Model Y crossover SUV, were between 6% and 20%, Reuters calculations showed, with the basic Model Y now costing $52,990, down from $65,990.

That is before an up to $7,500 federal tax credit that took effect for many electric vehicles at the start of January.

Tesla also cut prices for its Model X luxury crossover SUV and Model S sedan.

The cuts may make EV cars affordable to people who may have been previously priced out of the market.

For a U.S. buyer of the long-range Model Y, the new Tesla price combined with the U.S. subsidy amounts to a discount of 31%. In addition, the move broadened the vehicles in Tesla’s line-up eligible for the Biden administration tax credit.

Before the price cut, the five-seat version of the Model Y had been ineligible, which Musk called “messed up”. After the price cut, the long-range version of the Model Y will qualify.

But Tesla fans and customers complained the price cuts disadvantaged those who had recently bought a vehicle, leaving them with a lower second-hand value.

Greg Woodfill in Seattle, who bought a Model Y in December, had considered waiting until the new year to get the U.S. subsidy, but was lured by a discount at the time of $3,750.

“It’s a punch in the gut, to be honest,” he told Reuters on Friday, adding that it feels unfair Tesla sought to boost fourth quarter sales with discounts, only to cut prices a month later.

“If they knew they would drop the price this much, they should have just done it in December.”



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Ellen Bullock