Tesla cuts global prices, challenging rivals after missing delivery estimate – National | globalnews.ca

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Tesla Inc has slashed prices for its electric vehicles globally by up to 20%, extending an aggressive discount effort and challenging rivals after missing Wall Street delivery estimates for 2022.

The move marks a shift in the automaker’s strategy over the past two years, when orders for new vehicles exceeded supply. It comes after Chief Executive Officer Elon Musk warned that the prospect of a recession and higher interest rates meant he could lower prices to sustain growth at the expense of profits.

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Musk acknowledged last year that prices had become “embarrassingly high” and could affect demand. Shares ended down 0.9% after falling as much as 6.4% on Friday. Last year, Tesla shares had their worst year since the company’s inception due to slowing growth in China and Musk’s distraction with Twitter.

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Tesla cut prices in the United States, Europe, the Middle East and Africa, following a series of cuts last week in Asia, in what analysts saw as a clear opportunity for both smaller rivals that have been losing money and for legacy automakers. vehicle production.

“Competition is coming and they are responding with price cuts,” said Thomas Hayes, president and managing member of Great Hill Capital.

Discounts can make EV cars affordable for people who were previously priced out of the market. US and French buyers could take advantage of both discounts and federal tax credits available in both countries for certain EV purchases.

US price cuts on Tesla’s global best-sellers, the Model 3 sedan and Model Y crossover SUV, were between 6% and 20%, Reuters calculations showed, and the Model And basic is now $52,990, up from $65,990.

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Those cuts predate a $7,500 US federal tax credit that went into effect for many electric vehicles on January 1 that could lead to discounts of more than 30%.

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

Discounts generate more subsidies in France and the US.

A Tesla Germany spokesman said lower-cost inflation was also a factor in lowering prices in its main European market, without specifying which costs had fallen.

In Germany, Tesla cut prices between 1% and nearly 17% on the Model 3 and Model Y. The best-selling Model Y will now cost 44,890 euros ($48,499), down 9,100 euros.

It also cut prices in Austria, Switzerland and France.

In France, customers who buy the Model 3 for €44,990 will now get a further reduction via a €5,000 government subsidy on an EV scheme with a threshold of €47,000.

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The measure expands the vehicles in the Tesla lineup eligible for the Biden administration tax credit.

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Before the price cut, the five-seat version of the Model Y was not eligible, which Musk called “messy.” After the price cut, the long-range version of the Model Y will qualify.

Deutsche Bank estimated that a Model Y, after tax credits, could cost $18,000 less than Ford’s rival Mustang Mach E. , but Tesla’s “bold offensive move” secured growth and put competitors in big trouble, the broker said.

While Tesla’s shares fell, rivals’ shares were hit even harder.

US automakers General Motors Co GM.N and Ford Motor Co FN fell 4.5% and 6% respectively, putting them among the biggest losers in the broad-market S&P 500 index, while in Europe , Stellantis NV STLA.MI fell 3.7% and Volkswagen AG VOWG_p.DE fell 3.6%.

Wedbush analyst Dan Ives said the move could boost global deliveries 12-15% this year and shows Musk is responding to growing competition.

Tesla fans and customers complained that the price cuts hurt recent buyers.

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

The Tesla fan, who had previously owned a Model 3, said he was disappointed in Musk’s antics but decided to buy a Model Y because he loved Tesla products.

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

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

In China, where Tesla cut prices last week between 6% and 13.5%, owners protested at delivery centers and demanded compensation.

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By 2021, the United States and China combined accounted for about 75% of Tesla’s sales, but it has been growing in Europe.

Tesla cut prices in China and other Asian markets last week, which analysts say would boost demand and increase pressure on rivals including BYD 002594.SZ to do the same in what could become a war. prices in the largest electric vehicle market.

($1 = 0.9224 euros)

(Reporting by Hyunjoo Jin in Seoul, Zhang Yan in Shanghai and Victoria Waldersee in Berlin Additional reporting by Bansari Mayur Kamdar in Bengaluru, Samuel Indyk in London and Gertrude Chavez in New York; Writing by Kevin Krolicki and Josephine Mason Editing by Peter Henderson, Alexander Smith and Matthew Lewis)

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