Tesla Inc. TSLA, which sharply cut prices of its Made-in-China vehicles at the start of the year, has broadened the downward adjustment to the U.S.
What Happened: Tesla has drastically cut its vehicle prices in the U.S., with the reductions ranging from 6.4% to 19.7%, amid a slowdown in demand.
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Based on information available on the company’s website, the price reductions for the two models and their respective variants are as follows:
- Model 3 All-Wheel Drive: $43,990, down 6.38% from $46,990
- Model 3 dual-motor AWD Performance: $53,990, down 14.29% from $62,990
- Model Y dual-motor AWD Long Range: $52,990, down 19.70% from $65,990
- Model Y dual-motor AWD Performance: $56,990, down 18.57% from $69,990.
- Model S dual-motor AWD: $94,990, down 9.53% from $104,990
- Model S Plaid tri-motor AWD: $114,990, down 15.44% from $135,990
- Model X dual-motor AWD: $109,990, down 9.09% from $120,990
- Model X Plaid tri-motor AWD: $119,990, down 13.67% from $138,990
The estimated delivery times are listed as between January-February for Model 3, and January-March for Model Y and Model S vehicles. The Model X delivery times were listed as between March and June. Tesla also mentions that certain new Model 3 and Model Y vehicles qualify for a federal tax credit of $7,500 for deliveries until March 2023.
A few days ago, Tesla lowered the prices of the two models in China by between 5.7% and 13.5%. Although the move triggered a backlash from some recent buyers, who missed out on the benefit, it stimulated the receipt of strong orders.
Why It’s Important: The price cuts in the U.S. are steeper than what was announced in China last week. The Model Y LR now becomes eligible for the federal EV tax credit in the U.S., based on the vehicle qualification norms announced by the Internal Revenue Service recently. Previously, the Model Y LR variant was not eligible, as it did not qualify as an SUV and its price was above the $55,000 ceiling specified by the IRS for other vehicles.
With the tax credit, Tesla vehicles are cheaper than the reduced prices, as pointed out by Tesla influencer Troy Teslike.
Wow, Tesla just announced massive price drops in the US across the board. Model Y LR is now $13,000 cheaper before the tax credit and $20,500 cheaper including the tax credit.— Troy Teslike (@TroyTeslike) January 13, 2023
In case you are wondering if this affects my delivery estimate for Q1, yes, yes it does. pic.twitter.com/2OkKQ8XoZh
So now, after deducting the $7,500 tax credit, you can own a Tesla Model 3 in the U.S. for a price as low as $36,490.
Although these price cuts could have the ability to push up the volume, they would drag margins. The stock reaction when it opens for trading on Friday will show whether investors are focused on the topline or will fret over the margin impact of the price cuts. When Tesla announced the price cuts in China on Jan. 6, the stock climbed about 2.5%.
Price Action: On Thursday, Tesla shares ended up 0.28%, at $123.56, according to Benzinga Pro data.
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