U.S. electric carmaker Tesla slashed prices on its Model 3 and Model Y electric cars for the second time this month to boost customer demand amid rising interest rates. After missing delivery targets for several quarters, CEO Elon Musk is again willing to sacrifice the company’s profitability.
The automaker has cut the price of its Model Y long-range all-wheel-drive variant by 9.1% to $49,990, while the Model Y performance will be cut by 8.5% to $53,990. The cost of the Model 3 with rear-wheel drive will be reduced by 7 percent to $39,990.
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While other EV rivals in the U.S. market, such as Ford and new entrants Rivian and Lucid, are finding it difficult to make money at lower volumes, Tesla is in a high-margin position to partner with, according to Bloomberg.
After the company cut prices across the board for the first time earlier this year, Musk said on a Jan. 25 earnings call that the company was receiving orders at nearly double the rate of production. However, the company cannot sustain this supply-demand dynamic. Deliveries were up about 4% from the fourth quarter, and Tesla produced nearly 18,000 more cars than delivered to customers.
However, despite a second round of discounts on the Model S and X in early March, the company delivered just 10,695 of those vehicles during the quarter, the lowest level since the third quarter of 2021. The company will report first-quarter earnings on Wednesday, and investors will focus on the hit to margins from early price cuts.
First published date: April 19, 2023 at 10:38 AM CST