It's no secret that Tesla has seen some downfalls in 2022. This year, it has made a big move by making price cuts for its EVs. This could be Tesla's attempt to stay on top of the EV market, which will see several additions from different brands this year.
Benefits of the Price Cut
The once sole manufacturer of EVs now has competition to worry about. Several car companies are also releasing their own cars, entering the market that Elon Musk once dominated. This could be a move that allows Tesla to compete with the incoming competition.
The automaker may be attempting to entice customers with the deal, including those who are not sure about purchasing an electric car or are unwilling to wait for the other brands, as mentioned by Jessica Caldwell, the executive director of insights at Edmunds.
It's a rare thing for customers to be disappointed with lower prices, and prospective buyers might be more convinced to buy cars now that they are cheaper. For instance, the Model 3 Performance has gone from $63,000 to $54,000 before tax credits.
That also goes for the Model Y Performance which dropped to $57,000 from $70,000. Robby DeGraff, an analyst from AutoPacific, mentioned that Tesla's MSRP dropped by as much as $13,000, and said that this was rare for the car industry.
Tesla has given price cuts of up to 30% on its cars, which allowed tax credits to be applied. DeGraff added that due to the revised federal EV tax credits, the top-selling EVs should now be eligible for discounts, which can reach up to $7,500, as mentioned in The Verge.
The price reduction finally makes Tesla a mainstream car company, says Caldwell, as opposed to being a "market anomaly." The EV market giant will have to up its game, meaning they have to improve its price, design, and performance.
With the new EV releases from different automakers that also has next-level software integration, Tesla will have to release new models to compete. Its Model S is nearing its 10-year mark, as well as the Model 3 turning six this year.
Detriments of the Price Cut
The discounts Tesla has given out may backfire, as it did with Nissan a few years ago. Nissan created a competitive environment for its dealers with promises of sales bonuses, which were expected to lead to high fleet sales numbers.
The company failed to provide the incentives it had promised. Ultimately, this led to Nissan going from 40% in fleet sales to just 15% to 17% by 2022. The dealers mentioned that bulk sales affected resale values and hurt retail customers at trade-in time, according to Reuters.
Some customers are already concerned about resale value, specifically those who recently bought Teslas without the recent price cut. There have been complaints on Twitter asking for discounts on other services to make up for the extra they paid before the markdown.
