Tesla Down 6% in Premarket Amid Price Cuts in the US and Europe
Tesla extended its price cuts in the US and Europe to drive demand and allow more of its vehicles to qualify for EV tax credits, according to Bloomberg. The carmaker slashed the prices of some models by as much as 20%, depending on the configuration.
Tesla Slashes Prices Further to Qualify Cars for EV Tax Credit
Tesla reduced the prices of its electric cars in the US and Europe by 20%, making more of the company’s models eligible for a new federal tax credit. The move comes as part of Tesla’s attempts to drive demand after falling short of analysts’ estimates for 2022 deliveries.
But the price cuts should not come as a big surprise given that Tesla’s boss Elon Musk previously sounded alarm bells about a possible recession and how high-interest rates could force the company to slash prices to maintain volume growth. The report sent Tesla’s shares down 5.5% in premarket trading Friday.
Following the reductions, the purchase price of a dual motor all-wheel drive Model 3 sedan now stands at $53,990, down 14% from $62,990. Furthermore, the company trimmed the price of its long-range Model Y model by as much as 20% to $52,990.
The carmaker also trimmed prices for its Model X luxury crossover SUV and Model S sedan in the US. In Germany, the world’s biggest EV maker implemented price cuts of between 1% and 17% for its Model 3 and Model Y vehicles, depending on their configuration. It also reduced the prices in France, Switzerland, and Austria.
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Which EVs Qualify for the Federal Tax Credits?
The price cuts come a few months after US President Biden signed the Inflation Reduction Act into law, allowing consumers to qualify for a whopping $7,500 tax credits on new electric or plug-in hybrid vehicles. However, to qualify for the credit, the manufacturer’s suggested retail price for sedans must be below $55,000, whereas the price cap for SUVs, trucks, and vans is $80,000.
The move marks an opposite strategy from the one Tesla was using in 2021 and 2022 when the company struggled to meet demand. Musk admitted last year that car prices had become “embarrassingly high” and could weigh on demand.
Earlier this week, Bloomberg reported that Tesla is in preliminary talks to set up a plant in Indonesia to capitalize on the country’s reserves of essential battery parts. If the deal is reached, Tesla said the new factory would have an annual output capacity of 1 million vehicles.
The company’s stock plummeted more than 64% in the past year amid harsh macroeconomic conditions, increasing competition, and Musk’s deal with Twitter, which resulted in sharp criticism from Tesla investors. The company’s shares are trading at $123.67 apiece ahead of today’s market opening.
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