Tesla cuts electric car prices across Europe and US to bolster demand

 

A protest against the price cuts at a Tesla showroom in Chengdu, China. Former customers are angry that their vehicles lost significant value overnight © Reuters           

 

Tesla cuts electric car prices across Europe and US to bolster demand

 

Prices fall to lowest level in 2 years in response to falling supply chain costs

https://www.ft.com/content/e5f8fa7e-c56f-4ec0-bdd5-39ecebb4e741

 

Tesla has cut prices by up to a fifth across the US and Europe to bolster demand for its electric vehicles in the face of an economic slowdown and fiercer competition from established brands.

 

The electric-car maker said the cuts, which industry figures say take prices to their lowest level in two years, were in response to falling supply chain costs, as well as lower costs from shifting components closer to factories.

 

The latest drop comes days after price reductions by the brand in China, which sparked complaints from customers who had pre-ordered vehicles at higher prices or saw their cars lose significant value overnight.

 

Some Tesla customers protested against the Chinese cuts outside showrooms in Shanghai, Wuhan and Shenzhen earlier this month.

 

Tesla in Europe has attempted to head off any similar criticism by saying it will pass along price cuts to customers who have already ordered vehicles.

 

In the US, Tesla cut prices by up to $13,000 across its entire model range, reducing the price of some models by up to a fifth, according to changes on its website.

 

Prices in the UK for the Model 3 and Model Y — the two most affordable vehicles in its line-up — dropped by between £3,500 and £8,000 overnight, according to industry figures and prices listed on Tesla’s website.

 

Tesla said the cuts took the entry-level cost of a Model 3 in the UK to £42,900, with the higher-riding Model Y cut to £44,900.

 

Other alterations have reduced prices, such as offering black paint for free in Ireland. Previously only white was included, with other colours costing extra.

 

The move comes as shares in the group have fallen more than two-thirds in the past year over concerns about slowing demand, just when the company opened factories in Berlin and Shanghai, and rivals including Volkswagen and Hyundai are seeing sharp rises in their sales of electric vehicles.

 

Dan Ives, an analyst at Wedbush, called the cuts “the right medicine at the right time”. “It’s no secret that demand for Tesla is starting to see some cracks in this global slowdown for 2023,” he said.

 

He added that the reductions were an “offensive move” by Tesla that could raise demand by up to 15 per cent in the coming year.

 

Fiona Howarth, chief executive of leasing group Octopus Electric Vehicles, said the cuts would make Tesla’s cars “increasingly affordable”.

 

“It’s no secret that the EV industry has been struggling to keep up with booming demand,” she said. “We’re delighted to see EV leaders cut prices . . . it’s over to other suppliers to keep up.”

 

Tesla, which does not operate through traditional dealerships but sets prices centrally, periodically raises or lowers prices as demand and supply fluctuate.

 

It has been steadily raising its prices in recent months because of the strength of demand globally for electric cars, and as costs rise across the industry.

 

“We have seen some huge jumps, which is not great for the market,” said one person who monitors pricing. “It risks people losing confidence in Tesla.”

 

The cuts come after a year where Tesla’s sales rose 40 per cent to 1.3mn globally. In the UK, its Model Y was the biggest-selling electric car, and the third-biggest seller overall.

 

As leading economies brace for an economic slowdown, the auto industry has been waiting for a drop in orders, something that investors and analysts say is likely to hit Tesla first because of its shorter order book.

 

A Tesla spokesperson for the UK and Ireland said the price cuts were introduced because of lower costs.

 

“As we exit what has been a turbulent year of supply chain disruptions, we have observed a normalisation of some of the cost inflation, giving us the confidence to pass these through to our customers,” the spokesperson said.

 

“As local vehicle production continues to increase and we gain further economies of scale globally, we are making Model 3 and Model Y even more accessible across [Europe, the Middle East and Africa].”