Tesla just announced big price reductions!

RV_ · January 14, 2023

Chalkie · January 14, 2023

It's going to be interesting to watch Tesla. Dropping prices to boost sales as the stock prices have suffered in that last year. Car sales and stock prices are not necessarily a reflection of each other, I understand. Tesla has also started losing market share as other manufacturers introduce competition. S&P Mobility forecasts a drop to 20% by 2025 compared to 71% in 2021. The Austin American-Statesman had an article on the January 10th that Tesla was going to spend $700 million to expand the giga factory here by another 1.4 million square feet. The purpose of the addition is not yet known for sure but it is likely to expand production and testing. I would link the article but it is behind their paywall so not useful to others.

Kirk W · January 14, 2023

Forbes magazine has one of several articles about the Tesla market share trends. Part of the loss is due to the growth of the EV market but the author doesn't believe it is the entire answer.

Why Tesla’s Market Share Is Set To Plunge In 2023 Forbes

Battle to dethrone Tesla heats up just as Musk is distracted by Twitter (Updated January 13, 2023 at 10:25 a.m. EST) Washington Post

On the new factory expansion plans, I have seen several articles about that also.

Tesla Seeks Massive Texas Gigafactory Expansion Worth Over $700 Million (Tech Times 11 January 2023)

Why Tesla is spending another $770M expanding their Gigafactory (The American Genius)

RV_ · January 14, 2023

Here's another point of view explaining the price cuts. It's all about tax credits and leading the way.

"Tesla just slashed the prices of its cars — and it could be a game changer for EVs"

Excerpt:

"Tesla has cut the prices of all its electric cars, and that could spur others to do the same

Tesla has just done something none of us were really expecting. After raising its prices multiple times over the past couple of years, the automaker has cut the price of every single car you can order right now — ranging from discounts of 6% to 20% depending on the model.

We can all agree that this is a good thing. Not just because this price cut means more Teslas are now eligible for the federal EV tax credit, but also because of Tesla’s position at the top of the electric car market. The biggest problem electric cars face right now is that the price makes them less accessible. So a major automaker dropping its prices could have much wider (and positive) ramifications.

Meanwhile, the Performance Model 3 has dropped by $9,000 (14%) from 62,990 to $53,990 — a cut that brings it below the EV tax credit’s current $55,000 price cap. Something similar happened to the Tesla Model Y which, despite being a compact SUV, has been labelled a car in its five-seat configuration by the IRS. That means the $13,000 (20%) price cut, which brings the car down from $65,990 to $52,990, ensures more people can claim the tax credit on some of Tesla’s most popular cars.

If you ask people why they don’t have an electric car, two reasons tend to dominate. The obvious is fears over charging availability, though that will no doubt vary from location to location. The other is that EVs are so darn expensive. Far more expensive than their combustion engine counterparts.

Take, for instance, the Chevy Bolt. It may be the cheapest electric car in the United States, but it also costs $26,500. It’s far from the most expensive car Chevrolet has to offer, but it’s nowhere near the cheapest either. The Trax, Trailblazer, Malibu, Camaro, Colorado and Equinox can all be purchased for less — the majority of which are far larger cars with better traveling distance.

Take Ford’s F-150 Lighting as another example. We declared that it was the best F-150 on the road in our Ford F-150 Lighting review, but it is also much more expensive than the gasoline-powered model. The 2023 F-150 starts at $33,695, while the F-150 Lightning pricing currently starts at $55,974. That’s a $22,279 price difference, or $143,779 if you manage to claim the full $7,500 EV tax credit.

Both cars have also received various changes to their price over 2022. The Chevy Bolt was notable in that it received a very generous price cut in mid 2022 (around $6,000), which cemented it as the cheapest electric car in the United States. However, that price did increase by roughly $900 towards the end of the year.

The Ford F1-50 Lightning, which was in such high demand Ford had to stop taking pre-orders at one point, had its price raised three times in 2022.

Originally the entry-level Pro model, which is designed for commercial use, had a $39,974 starting price. That rose to $46,974 in August 2022 (opens in new tab), $51,974 in October (opens in new tab) and then again to $55,974 in mid-December (opens in new tab). Not to mention the fact there are multiple stories of dealers marking up the price of the truck — by as much as $30,000 according to some reports (opens in new tab) — as they cashed in on demand.

At least Tesla’s direct sales model hasn’t suffered that problem, no matter how many price hikes there are or how much demand there is.

The Chevy Bolt and the F-150 Lightning are not alone either. Plenty more cars have seen their prices increase by various amounts, including the Ford Mustang Mach-E (opens in new tab) and VW ID.4 (opens in new tab), The Nissan Leaf even saw its price rise, though it was only by $520 (opens in new tab).

The obvious problem is that when EVs already have a reputation for being expensive, raising the prices doesn’t do anything to quell those fears. It doesn’t matter whether the reasons are due to supply chain problems, raising the cost of production or corporate greed, the effect is the same. While it’s worth noting some price hikes were reversed (Cadillac (opens in new tab) and Rivian (opens in new tab) come to mind), it feels like EV prices are going in the complete wrong direction.

The cost of buying an electric car needs to be coming down, especially as more automakers get involved, and more options become available.

Tesla’s price cuts could push others to do the same

These price cuts aren’t the only discounts Tesla has offered in recent weeks. Back in December the automaker offered $3,500 off the price of the Model 3 and Model Y provided you took delivery before the end of the month. This was later extended to $7,500 (opens in new tab), the same amount as the federal EV tax credit, for both cars, with the Model S and Model X (opens in new tab) joining the fray during the final days of 2022.

But these discounts were temporary, and were never going to stick around forever. This doesn’t appear to be the case for the current wave of price cuts. While prices may well start increasing again someday, offering such a significant price cut is a great thing for consumers.

It doesn’t matter if Tesla has done it to boost orders, take advantage of tax credits, or if the spiraling stock price has got the company panicking. Tesla has long been the most popular electric car maker in the United States, and is currently (opens in new tab) the best-selling luxury car maker overall. The automaker is also credited with helping to reinvigorate interest in battery-powered vehicles, kicking off the current flood of electrification we’re experiencing.

Tesla is the electric car success story, and other automakers are paying attention to what it does. Tesla lowering its prices, and not raising them for a significant period afterwards, could prompt others to do the same. Especially if the price cut leads to an increase in sales and higher demand for Tesla cars.

It doesn’t matter whether rivals are actively copying Tesla to try and mimic its success, or trying to stop a major competitor from gaining too much of an advantage. It also doesn’t matter if only a handful of car companies take notice at first; you just need a few of them to get the ball rolling and drop their own prices in response to Tesla. The more that do, the lower prices could theoretically drop.

Automakers are businesses first, and they won’t be keen to sacrifice their profit margins. Electric cars are expensive for a reason, with costs associated with materials, different manufacturing needs, plus general research and development. Only time will help those costs decrease, as electric car makers settle into the new normal.

Bottom Line

Tesla’s price cut is, first and foremost, a big deal for prospective Tesla customers. Not only has this effectively reversed a number of recent price hikes, there are two more Tesla cars that are eligible for the federal EV tax credit. That makes the car a much more enticing purchase, assuming you’re okay with the uniqueness of the Tesla experience.

But Tesla is the big shot of the electric car industry, and when it jumps the others check to see how high it was. While they may not be scrambling to drop their prices right away, you know they’ll be taking notice. If Tesla’s price cut pays off over the coming months, other automakers may be inclined to follow its example.

Though how low those prices might drop is currently anyone’s guess. Let’s just hope it’s low enough to push more people to take the plunge and purchase an electric car of their very own."

"Why Tesla is spending another $770M expanding their Gigafactory

Excerpt:

"Tesla has already invested heavily in moving operations to Texas, so what does this new $770M expansion mean?

"The electric vehicle giant is gearing up for construction as it hopes the tides will change regarding the battery shortage. Tesla vehicles are not hybrids they rely solely on battery usage making them a complete electric cars. However, with such shortages of batteries, they have delayed or even canceled many projects over the years.

The addition of the cathode plant though should relieve some of the constraints put on the demand and other Tesla factories across the nations. Tesla is reportedly planning on building a cyber truck in Texas, but the cells they have been receiving for it are currently coming from Arizona.

Considering it takes more than half a day to drive by car or truck between Texas and Arizona, being able to build the cells in Austin itself will be saving them a small fortune alone. With the cyber truck in tow, Tesla will be able to further the expansion of EVs.

It is projected that the Model 2 EV will be manufactured at the Austin Gigafactory, and without that cathode unit, the plant would struggle to enter the market in a timely manner. Combine all of these ingredients, and one can see why it is vital that Tesla gets these new buildings up and running smoothly before the inevitable unveiling of the Model 2.

The original article Kirk quoted is here:

https://theamericangenius.com/tech-news/why-tesla-is-spending-another-770m-expanding-their-gigafactory/

Tesla is making their own battery pack production and transit times a priority.

Edited January 14, 2023 by RV_