Tesla extends price cuts to U.S., Europe to drive demand

  • Tesla cuts prices in the US and Europe by up to 20%
  • Stable cost inflation behind Germany cuts: spokesperson
  • Stocks fall in US premarket
  • Change follows price cuts across Asia last week
  • Some models now qualify for US credits, French subsidy

Jan 13 (Reuters) – Tesla (TSLA.O) cut prices for its electric vehicles in the US and Europe by up to 20%, extending an aggressive discounting strategy after missing Wall Street estimates for 2022 deliveries.

The move, which sent Tesla shares down 4.5% in U.S. premarket trade, came after CEO Elon Musk warned that the prospect of a recession and higher interest rates meant it could drop prices to sustain volume growth at the expense of profit.

The lower price in Tesla’s key markets marks a reversal of the strategy the automaker had followed through much of 2021 and 2022, when orders for new vehicles exceeded supply. Musk acknowledged last year that prices had become “embarrassingly high” and could hurt demand.

More stable cost inflation was also a factor in lowering prices, a Tesla Germany spokesman said, confirming the price cuts in its main European market.

The US price cuts announced on Thursday for its global sales flagships, the Model 3 sedan and Model Y crossover SUV, were between 6% and 20%, Reuters calculations showed.

The base version of the Model Y is now priced at $52,990, down from $65,990 before.

That’s before a federal tax credit of up to $7,500 that went into effect for many EV models in early January.

Below is a table with the price cuts by model in Germany and the United States:

Reuters Charts Reuters Charts

Tesla also slashed prices on its Model X luxury crossover SUV and Model S sedan in the United States.

In Germany, it reduced the prices of the Model 3 and Model Y by between around 1% and almost 17%, depending on the configuration. It also cut prices in Austria, Switzerland and France.

For an American buyer of the long-range Model Y, Tesla’s new price combined with the US subsidy equates to a 31% discount. Additionally, Tesla’s move has expanded the vehicles in its lineup eligible for the Biden administration tax credit.

Prior to the price cut, the five-seat version of the Model Y was not eligible for that credit, a designation Musk called “messy”. After the price cut, the long-range version of the Model Y will qualify.

The cutbacks could make EV cars affordable for people who may have previously been excluded from the market.

In France, customers who buy the Model 3 for 44,990 euros ($48,773) will get a further price reduction through a government subsidy of 5,000 euros. The limit for the EV scheme is 47,000.


A new Tesla Model 3 is shown at a delivery center on the last day of the company’s third quarter in San Diego, Calif., Sept. 30, 2019. REUTERS/Mike Blake

“This should really boost (Tesla’s) 2023 volumes,” said Gary Black, a Tesla investor who remained bullish on the company and its prospects during the recent sharp decline in the share price, in a tweet. “It’s the right move.”

Still, stocks in US premarket trade fell as investors feared the move could erode plentiful margins, particularly as competition intensifies.

“Tesla is an exception because it still has impressive valuations when it comes to the number of cars it actually sells. But at the end of the day, there are all the other vendors that sell far more cars overall,” said Michael Hewson, chief analyst at market at CMC Markets UK.

Some users on the Tesla fan forums online also complained that the price cuts hurt those who recently bought their vehicles, leaving them with a lower second-hand value.

“Just dropping 10,000 euros like that – definitely makes you feel like you’ve overpaid,” wrote one user on a ‘Tesla Drivers and Friends’ forum.

In China, where Tesla cut prices last week by 6% to 13.5%, owners protested at delivery centers, asking for compensation.

Before the cuts, Tesla’s US inventory, as tracked by models its website shows as immediately available, was up. Prices for used Tesla models have also been falling, adding pressure to adjust prices for new cars.

For 2021, the United States and China together accounted for about 75% of Tesla’s sales, although sales have increased in Europe, where its Berlin factory is ramping up production.

Reuters charts


Tesla cut prices in China and other Asian markets last week in its first major move since naming its China and Asia chief Tom Zhu to oversee US production and sales.

Analysts said Chinese price cuts would boost demand and increase pressure on rivals there, including BYD. (002594.SZ)to follow suit in what could become a price war in the largest single EV market.

Tesla’s Model 3 was Germany’s best-selling electric vehicle last month, followed by the Model Y, beating Volkswagen. (VOWG_p.DE) ID.4 fully electric. Volkswagen recently raised the price of its entry-level ID.3, putting it on par with the now discounted Model 3.

Tesla missed Wall Street’s estimates for fourth-quarter deliveries. Full-year delivery growth was 40% – also below Musk’s forecast of 50%.

Tesla shares under pressure

($1 = 0.9224 euros)

Reporting by Zhang Yan in Shanghai, Hyunjoo Jin in Seoul, Victoria Waldersee in Berlin; Additional reporting by Bansari Mayur Kamdar in Bangaluru; Written by Kevin Krolicki in Singapore and Josephine Mason in London; Editing by Lincoln Feast, Kenneth Maxwell, Mark Potter and Alexander Smith

Our standards: The Thomson Reuters Trust Principles.