Tesla price cuts: Model Y now costs less than the average US car

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• Earnings down almost a quarter in the first quarter
• Model Y $759 less than average new US vehicle
• Argument for discounts: rate hikes by the central banks

The electric vehicle manufacturer Tesla has reduced its prices in the USA six times since the beginning of the year. The CEO’s strategy Elon MuskInvestors and analysts are critical of putting higher sales growth above profit. In the recently published quarterly report it became clear that the profit in the first quarter fell by almost a quarter. Tesla shares also fell significantly after the figures were published.

Aggressive US cuts by Elon Musk

As Bloomberg reports, the Model Y now costs less than the typical new vehicle in the United States. The base model starts at $46,990 – $759 less than the average price for a new vehicle in the US. The Model Y is a top SUV and was the best-selling electric vehicle last year.

Morgan Stanley analyst Adam Jones sees Musk’s strategy as aggressive pricing. This may prompt some automakers to slow their pace of investment in electric vehicles rather than price war with Tesla in an uncertain economy. “We wonder if this is the time when vehicle manufacturers’ boards might reconsider whether they can scale back the extent and timing of their investment plans in electric mobility,” Jonas told Bloomberg.

Elon Musk’s main argument for the rebates is the interest rate hikes by the central banks, as the Handelsblatt writes. These make price reductions necessary. Because the central banks are weakening the economy with their interest rate hikes and ensuring lower demand for capital goods such as electric cars. Conversely, this should lower inflation. As Business Insider reports, Musk told investors in a conference call, “We believe that higher volume and a larger fleet is the right choice here, as opposed to lower volume and higher margin.” Nevertheless, shareholders fear a downward spiral.

Germany with second price reduction

Not only in the USA, but also in Germany, the prices for the Model 3 and Y from Tesla are falling for the second time. The base price for the Model Y is currently 44,890 euros, for the basic version of Model 3 you pay 41,990 euros. Carwow goes on to say that industry insiders see two reasons for the discounts. On the one hand, given the high margin at Tesla, a high profit per vehicle can still be achieved with a price reduction, on the other hand, Tesla has increased production capacities. Adjusting prices will help Tesla meet sales targets.

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