Price drops of as much as 20% have come to Tesla in a bid to undercut rivals in the increasingly crowded market. The aggressive pricing strategy is in the light of missed delivery targets for 2022.
Elon Musk had warned that the leading electric vehicle manufacturer may have to slash prices in order to maintain growth in an environment of higher interest rates and prospect of recession.
But what are the possible reasons behind the drastic price changes? What should Tesla customers in Orange County and other areas expect?
Affordable electric cars
Tesla’s main goal has always been to lead and accelerate the transition to sustainable energy. They can achieve this by making their vehicles easily accessible to the masses.
Musk had mentioned that the price of Tesla cars had become “embarrassingly high,” and admitted that this could hurt demand. Tesla stock was also at its worst last year, 2022, since the firm was established, and so price drops may be a necessary evil.
Bruising competition
Electric vehicle manufacturing startups have entered the fray and the auto electric market is as competitive as ever. There are also major players like General Motors and Ford producing competitive vehicles with longer ranges and are affordable.
Bruising competition has seen Tesla reduce the prices for their EVs in Europe, United States, Middle East, Asia and Africa. Analysts saw these price drops as a clear shot at legacy automakers leveling up their production of EVs, and small players struggling to survive.
Expansion into new markets
Tesla has been expanding rapidly into Europe and China, and this has not been without its challenges. The electric automaker has faced challenges with local regulations when setting up distribution networks and manufacturing plants. By reducing prices, Tesla hopes to make inroads into new markets and increase its share.
Better production efficiency
Certainly, it wouldn’t make sense to reduce the cost of EV units in the face of hemorrhaging costs. Tesla can afford to make price discounts based on increased production efficiency.
The company has significantly invested in technology and manufacturing processes which has allowed it to reduce its costs of production. This means Tesla can slash their EV prices without sacrificing quality.
For example, Tesla recently slashed as much as $10,000 Model S, Model X, and Model 3.
The company is also going ahead with plans for online-only store sales models to further reduce the costs. This allows it to pass the cost to consumers.
Not everyone is happy with the price decreases
The price cuts did not make everyone happy, especially those that recently bought a Tesla. Someone that bought a Model 3, only for the price to go down a month later will feel short-changed. It’s a punch in the gut for most fans.
But despite the price decrease, Tesla remains the most sought-after electric vehicle on the market. The automaker banks on strong reputation and brand, and the demand for EVs continues to be on an upward trajectory. Tesla is well-positioned to leverage on these trends and remains ahead of the competition in the electric vehicle market.
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Bradley attended Boston University where he received a Bachelor’s degree in Economics and Political Science as well as a Master’s degree in Business Administration from Columbia University Graduate School of Business (currently attending). He loves to write about everything business related.
