The previous discounts have positively affected Tesla’s quarterly sales, with the automaker selling 422,875 cars EVs in Q1.
Tesla Inc (NASDAQ: TSLA) has announced further price cuts for its Model 3 and Model Y electric vehicles. This is the second time within a month that the electric car maker is doing this.
The price cut announcement precedes Tesla’s Q1 earnings report, which will be monitored closely by investors. Investors will observe how Tesla maintains its profit margins after announcing a series of price cuts this quarter to spur sales and drive demand amid growing competition.
Tesla’s Ongoing Price Cuts
Between January and February, Tesla announced discounted prices for its Model 3 and Model Y vehicles in the US. It also cut the prices of the Model S and Model X in March. Outside the US, Tesla also cut prices for its vehicles in Mexico, Europe, and China.
Speaking about EVs, Karl Brauer, executive analyst at iSeeCars.com said:
“There are clear signs the elevated prices of the past two-plus years are coming to an end.”
Brauer believes the tougher macroeconomic conditions are contributing to the drop in sales and the consequent drop in prices.
In the US, the prices for Model Y vehicles have been cut by $3,000 each. The Model 3 Standard Range RWD also got a $2000 reduction, making it the first new Tesla to cost less than $40,000. However, the car model is the only Tesla model to have its federal tax credit reduced from $7,500 to $3,750 based on the US. Treasury’s updated battery sourcing guide. Other cars may benefit from as much as a $7500 reduction.
Truly, the discounts have positively affected Tesla’s quarterly sales, with the automaker selling 422,875 cars EVs in Q1. However, analysts believe the rise in sales will compromise Tesla’s profit margin. They expect the company’s profit to hit a three-year low in the Q1 earning report.
Staying Ahead of the Competition
With the new US vehicle emissions regulations, the demand for EVs is bound to skyrocket. EV adoption may even grow by more than the 50% previously announced by the Biden administration for 2030. Indeed, the price cuts have boosted Tesla’s sales. However, they also highlight the challenges the company may face in maintaining its margins and profitability.
Tesla’s ongoing price cuts may very well be its attempt to stay ahead of the demand and maintain its market share. However, until it cuts production costs as Elon Musk previously announced, its margins may be in danger.
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