Tesla is slashing prices in the U.S., China, and Germany as the electric vehicle maker battles slowing sales and an increasingly competitive market for EVs.
In the U.S., the company on Friday cut the prices of three of its five models by $2,000. The new prices are:
- $42,990 for a new Model Y
- $72,990 for a Model S
- $77,990 for a Model X
Prices for the Model 3 and Cybertruck are unchanged at $38,990 and $81,895, respectively.
The price cut in China — the Model 3 now sells for about $1,930 less — is particularly noteworthy given that Tesla faces stiff competition against more than a dozen electric vehicle rivals there, including Li Auto, Nio, and BYD.
BYD has been lowering its prices, in some cases by as much as 20%, this year to stay competitive in China's EV market, Reuters recently reported. Earlier this year, BYD toppled Tesla and became the world's biggest EV seller, Forbes reported.
Tesla is currently facing a rise in competition within the U.S. market as other automakers are introducing new electric vehicles to attract consumers. Companies like Ford and General Motors have made significant investments to manufacture electric vehicles at a lower price compared to Tesla. While Tesla dominated 80% of EV sales in the U.S. between 2018 and 2020, its market share dropped to 55% in 2023, as reported by Cox Automotive.
"Tesla continues to lead the market in EV sales, but there are now more appealing alternatives available," stated John Vincent, senior editor for vehicle testing at U.S. News and World Report, in an interview with CBS MoneyWatch.
In Germany, the price of the Model 3 has been reduced from $43,670 to $42,990.
Previous Price Reductions by Tesla
Last year, Tesla made significant price cuts of up to $20,000 on certain models. In March, it offered a temporary discount of $1,000 on the Model Y, its best-selling vehicle. These price reductions have impacted the company's profit margins, causing concern among investors.
In Monday afternoon trading, Tesla's stock price dropped by over 3% to $142.20 per share. The stock has decreased by more than 40% since the beginning of the year.
These price reductions by Tesla coincide with a period of recalls, layoffs, and a decline in sales for the Texas-based company.
Recently, Tesla recalled around 4,000 Cybertrucks due to faulty accelerator pedals that could dislodge under high force, potentially becoming trapped in the interior trim above it, as reported by the National Highway Traffic Safety Administration (NHTSA). This issue increases the risk of a collision, according to NHTSA.
Tesla is also planning to reduce its workforce by over 10% of its approximately 140,000 employees, as confirmed by Musk in a regulatory filing. This could lead to layoffs for around 14,000 Tesla workers by the end of the year.
The company announced this month that it delivered 386,810 vehicles from January to March, nearly 9% lower than the 423,000 delivered in the same period last year. Tesla attributed the decrease in part to the introduction of an updated version of the Model 3 sedan at its Fremont, California factory.
The upcoming months are critical for Tesla as investors will be monitoring Musk's ability to revitalize the business heading into 2025, according to Wedbush Securities analyst Dan Ives. "For Musk, this is a pivotal moment to guide Tesla through this challenging period; otherwise, there could be tough times ahead," Ives stated in an analyst's note.
