Tesla has lowered the prices of some of its most popular electric cars, including the entry-level Model 3 and the Model Y, by thousands of dollars in the US and Europe in an effort to boost customer demand. The company is facing a difficult global economic outlook and increased competition from other car manufacturers, which has led to the decision to lower prices. The price cuts in the UK range from 10-13%, but run as high as 20% on some US models.
However, the move has angered some customers who have recently purchased the vehicles at the higher prices. One customer posted on a Facebook group for Tesla owners, “I just picked up the car yesterday. What should I do? Go to Tesla and give back the car? I can’t believe after a few hours from picking up the car I lost £5k”.
Tesla has faced a similar reaction in China, where it announced price cuts last week. Over the weekend, disgruntled owners demonstrated outside Tesla distribution centers in Shanghai and other cities, calling for compensation. Tesla has reduced prices twice in China in the last six months and they are now 13-24% below September levels.
To avoid similar objections in the US and Europe, Tesla stated that customers who had ordered but not yet received their vehicles would be charged the new lower price. Ginny Buckley, from the electric vehicle marketplace, Electrifying.com, stated that the price cuts are controversial and are likely to “send shockwaves” through the industry, as it may signal a shift from Tesla’s premium brand to a more mainstream product.
Paul Hollick, chair of the Association of Fleet Professionals, welcomed the price cuts, stating that it will make electric vehicles more affordable for his members. However, he also acknowledged that the “disorderly marketing” may not be good news for the company.
The electric car manufacturer has been growing rapidly in recent years as it moves from being a niche premium brand to a mass market manufacturer. However, the company is facing significant challenges such as slowing global growth, higher interest rates, and increasing competition from more established car manufacturers and Chinese brands. When demand for Tesla cars far exceeded supply, the company was able to maintain prices at what CEO Elon Musk described as “embarrassing levels”, but as more electric car brands enter the market, the company can no longer afford to do so if it wants to continue growing.
The move is also expected to have a big impact on used Tesla prices, which have already fallen by more than a fifth last year. The lowest priced new Tesla Model 3 in the UK is now priced at £42,990 and Model Y vehicles start at £44,990. Demand for electric vehicles has been rising steadily, driven by rising fuel costs and concerns around climate change. Electric models accounted for almost one-fifth of new car sales in the UK last year.
However, last year, CEO Elon Musk acknowledged that prices for new Teslas had become “embarrassingly high” and could hurt demand. Globally, Tesla deliveries rose 40% in 2022 but that was below market expectations. This resulted in a further blow to the company’s share price which fell more than 65% over the year as a whole, marking its worst year since going public in 2010. The dramatic slide in the share price also dented Musk’s fortune and pushed him off his spot as the world’s richest person.
Tesla stated that there had been “significant challenges” last year including a shortage of semiconductors, the rising cost of energy, and ongoing COVID-related disruptions. However, the company stated that its focus on “original engineering and manufacturing processes” and a recent “normalization” of some of the cost inflation had allowed it to pass on savings to customers. Like other car