Tesla’s price-cutting strategy to maintain its dominance in the global electric vehicle market has seen several automakers rise with their respective products. Wall Street estimates that Tesla will cut the price of its electric vehicles by as much as 20% in 2022 alone to maintain its supremacy in the zero-emissions vehicle market. Interestingly, the move marks a 180-degree shift in the electric carmaker’s strategy over the past two years when new car orders outstripped supply.
The price-cutting strategy comes after Tesla Chief Executive Elon Musk warned that the automaker could lower prices on vehicles that include profit margins. He hinted that the prospect of a recession and higher interest rates meant Tesla could lower prices at the expense of profits to sustain growth. He acknowledged in 2022 that Tesla vehicles are already embarrassingly expensive and could hurt demand. In fact, Tesla stock was hammered last year, posting its worst annual performance since its inception, as China’s economic growth slowed.
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Tesla has lowered the prices of its vehicles in the U.S., China, Europe, the Middle East and Africa as part of its price-cutting strategy. The price reduction was announced through a series of price cuts over the past few weeks. Reuters reported that the move was a clear blow to smaller rivals and traditional automakers. Smaller brands have been draining cash and have been unable to cut prices like Tesla, while traditional auto brands are aggressively ramping up production of electric vehicles. As analysts say, Tesla is facing stiff competition and is responding with price cuts.
These price cuts and discounts announced by Tesla will further salvage the brand, boosting sales, especially in markets like the U.S. and France, where buyers can take advantage of discounts and federal tax credits available for buying electric vehicles.
First published date: Jan 16, 2023 at 14:39pm CST