Tesla dropped the starting prices of two of its best-selling models overnight, marking the company’s fourth price cut in the US this year. The company cut USD 3,000, or about 6 percent, off the starting prices for all three versions of the Model Y small SUV, Tesla’s top seller. This cut US$2,000, or about 5 percent, off the understated starting price of the Model 3 small sedan.
Tesla could cut Model 3 prices to make the cars loaded with options eligible for the US government’s $7,500 electric vehicle tax credit. With options, some would exceed the government’s US$55,000 price cap for cars eligible for the Model 3 credit.
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But some industry analysts say demand for the company’s vehicles may slow down as more competition is coming in the market. Others say Tesla is using its high-profit margins to take market share from competitors. A message was left Wednesday morning seeking comment from Austin, Texas-based Tesla.
The cuts followed a fall in prices overseas this week, with analysts reporting cuts in Europe, Israel and Singapore. They come just before Tesla’s first-quarter earnings call, scheduled after the closing bell on Wednesday.
A US$3,000 price cut on the Model Y saw the lowest-priced dual motor model drop to US$46,990. The Long Range model drops to USD 49,990, and the Y Performance drops to USD 53,990. All versions of the Model Y were already eligible for the US tax credit as the price limit for SUVs is US$80,000.
Tesla’s lowest-priced Model 3 rear-wheel drive model received a price cut to US$39,990. The Model 3 Performance Edition remained the same at USD 52,990. Neither of Tesla’s slow-selling larger models, the S and X, are eligible for the tax credit, and prices remained the same for both on Wednesday.
CEO Elon Musk has said that demand for the company’s cars is limited by affordability. “There is a lot of demand for our products, but if the price is more money than people, then that demand is irrelevant,” he wrote on Twitter earlier this month.
Due to the previous price cut, Tesla’s first quarter sales increased by 36%, but still fell short of analysts’ expectations. The company said it delivered a quarterly record of 422,875 vehicles worldwide from January to March, up 310,000 from a year earlier. According to FactSet, growth for the quarter fell short of analyst estimates of 432,000. Analysts are watching Tesla’s financial results to see whether the price drop cuts into profit per vehicle and margin.