Tesla Slash Prices of Its Model 3 Sedan And Model Y Vehicles in The U.S to Boost Demand

Electric Vehicle manufacturer Tesla has once again slashed the prices of its Model 3 Sedan and Model Y Vehicles in the U.S. to boost demand.

On its website, Tesla slashed the prices of its Model 3 Sedan by $1,000 and its Model Y vehicles by $2,000, bringing the prices to $41,990 and $49,900 respectively.

Recall that the automaker recorded an impressive first quarter (Q1) result where it delivered 422,875 vehicles globally. The S and X Models made up 10,695 of those deliveries.The strong first-quarter sales were a result of Tesla implementing dramatic price cuts in January as a response to disappointing numbers in the final quarter (Q4) of 2022.

Comparing the number of deliveries for the first quarter of the year, with those for the last quarter of 2022, reveals that deliveries rose by four percent. While deliveries of the more mass-market cars, the Model 3 and Model Y, increased by 6 percent. Tesla has set a target of $1.8 million in deliveries this year.

Tesla CEO Elon Musk disclosed that the price cut on some of its vehicle models was necessitated because the higher interest rate environment was hurting demand.

After the January reductions, the company reversed some earlier cuts, and Musk suggested the price adjustments fueled buyer interest. Tesla discovered that small changes in the price of its vehicles have a big effect on demand. The company is slated to report quarterly results for the first quarter on April 19.

Meanwhile, analysts express concerns that Tesla’s industry-leading profit margins could be at risk. Several industry analysts suggest that Tesla’s increase of delivery by 4 percent in the first quarter of this year is not an impressive figure, as they express worry over the economy and also an increasingly strong presence from rivals who are finally marking their presence in the EV sector after Tesla had long dominated the industry.

Morningstar analyst Seth Goldstein said,

“When Tesla reports financial results later this month, we will look for management’s plan in response to the U.S. Treasury Department’s guidance on the Inflation Reduction Act. Based on the updated results, the least expensive version of the Model 3 will likely be ineligible for the $7,500 tax credit as the battery is produced in China. This has the potential to weigh on Tesla’s sales growth in the U.S. as the lack of a credit may turn some consumers away. This will likely keep Tesla’s sales volumes toward the lower end of management’s 2023 guidance for 1.8-2 million vehicles”.

Some other analysts predict that Tesla could be forced to introduce further price cuts because rivals such as Ford, have also cut prices in response to Tesla’s move.