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Tesla looks for sales rebound by cutting prices in the U.S.

Jan. 13, 2023 3:33 AM ETTesla, Inc. (TSLA)By: Yoel Minkoff, SA News Editor285 Comments

Tesla electric vehicles awaiting preparation for sale. Tesla EV Model 3, S and X are a key to a cleaner and greener environment.


Tesla (NASDAQ:TSLA) is slashing the prices for some of its vehicles sold in the U.S., which will make them eligible for a $7,500 U.S. government tax credit. The step is a big first move by lead executive for China and Asia, Tom

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Comments (285)

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Dale Roberts profile picture
I saw an analysis that suggested Tesla profits could essentially or almost get wiped out in the next quarter with current discounts.

That said, if sales increased 47% profits would stay in line.

Please post any other profit analysis that you've found.
Long Player profile picture
@Dale Roberts The thing I am waiting on is that Musk effectively upended the financing market. You have states where buyers can simply take the Tesla to the finance company and give them the keys and the finance company has to eat the loss. There are other states where they can get the buyer for the loan difference. It all depends. But it seems like those price cuts are going to hurt financing cars for some time to come.
Dale Roberts profile picture
@Long Player What? Kind of like Americans having the right to drop off the keys to the house they can't afford?

Crazy. No regulations in the U.S.
Long Player profile picture
@Dale Roberts Depends upon the state. It is the finance company's job to check the security. Established car companies know how to do this without upsetting the whole situation. TSLA obviously does not
PDXGuy profile picture
Last night I booked model Y after 20% reduction in price and smartly invested the approximate savings $15k plus in Tesla stock this morning. A win win situation for me 😎🤑🤑🤑
BondiBaz profile picture
@PDXGuy I skipped plans for a new EV altogether and have to date invested most into TSLA. I can wait to buy new car but this is a rare buying opportunity. Adding more on any future dips. Good luck!
captainccs profile picture
@monkeywine "I skipped plans for a new EV altogether and have to date invested most into TSLA."

I don't remember what car brand he was talking about in One Up on Wall Street, probably Honda, Peter Lynch mentioned how much better off you would have been buying the stock instead of the car. ;)
Bill Cunningham profile picture
"Peter Lynch mentioned how much better off you would have been buying the stock instead of the car. ;)"

,,,so saving and investing is more profitable than buying large ticket consumer items? Who would have thunk it??

Thought Question: Which will depreciate faster, a Tesla or TSLA?
In a large city many park their cars on the street so how is everyone going to come home from work and charge their cars?
People will be lined up and fighting for a spot.
No thanks.
@gekko69 That is the problem with EV cars in China. There is no way to charge your car in a tall apartment building.
@Yihai Ding thats a good point but i am sure there will be charging stations and new/old apartments must be working with authorities to have it provisioned. If adoption is increasing then all this happen soon!
BondiBaz profile picture
@gekko69 yeah. It’s like being low on petrol. Where do I park? Where do I fill up? Now I can’t sleep so stressed about it.
Gaucho profile picture
The ability to cut prices while still being profitable is a sign of a strong company. For example BYD sells EV and if you look at the battery only EVs they are making 2.9%. The 30,000 orders in one week after Tesla slashed prices 9% will hurt the Chinese competition.
@Gaucho Tesla went back old prices.. Still Model 3 is expensive.. GM and Ford are get in trouble due to this.
@Gaucho thanks , I value your perspective and insight .
Gaucho profile picture
@Vince Gowda With the price cuts a model Y with with tax credits will cost $43,000. WOW then you have a great car that costs very little to drive and very little breakdowns. The order backlog will now grow back to 6 months so order NOW. TESLA MODEL Y NOW CHEAPER AN VW ID4 in Germany
They will still earn money on their cars! Which is crazy when thinking of their current price and value.

ICE producers will be crushed this year. Second hand Model 3 pre 2021 will be insanely cheap in a year or 2. Too good to be true for new buyers in that time.
riverside1993 profile picture
ZIRP is gone and reality is now rearing its ugly head.

No matter, the BEV guys will kick back in their recliners and dream of solid state batteries and wireless charging from the roadway.
Can you really rebound when you are already going up i.e. 40% increase yoy sales?
I don't think that is physically possible.
ckarabin profile picture
I cannot think of anything more telling about falling demand and unutilized capacity that will rise even more in 2023 than a 20% price cut
I am still waiting for the announcement of a new factory in Mexico, that was supposedly going to be announced in 2022, and now this month.

I guess Indonesia is where its at. No infrastructure anywhere, but somehow, the best place to open a factory.
ckarabin profile picture
@eugene_ Labor cost? Work force education and skill level counts for a lot too
yes, but that cost would probably get overwhelmed with other costs. it is surprising that no other car makers are there, so what does Tesla know? I am thinking, nothing. Just more PR, but nothing serious. Just like the India factory.
I’m a uk investor. Email arrived this morning direct from Tesla. Tesla model 3 long range price reduced by £7500 sterling. Now £50900. A very real price drop - will rattle straight thru to second hand prices. This is a massive reduction and real. Was about to order my replacement so I am very clear on previous pricing. Clearly will impact margin. Seeking to maintain volume with new factories coming on stream. Can only see SP falling. I’m not a holder of this stock - had German cars for many years prior to current M3 Tesla. These German giants will absolutely fight back hard in next five years after slow start. Can’t see anything but margin reduction and reducing volume. They are still a little way off Tesla on range. But interiors knock socks off Tesla. All in all. Share price will drop j think.
ESP equity research profile picture
@Brit Dave Yes TSLA is running out of demand for these sedan-like auto's - hence the need to reduce prices or lower production. But this may actually increase earnings and free cash flows for TSLA - thier per unit costs are decreasing(look at steel price as an example), and more units to cover the fixed costs...

If F goes down with this news I will buy more shares. Pricing for large SUV's, trucks, and Vans is still very strong - no need for large price cuts...

@Brit Dave You are right, I now drive a BMW iX3 and indeed less range but I don't need that 50/80km extra range. But the driving experience, the interior, the finishing of my BMW is really high level in comparison with a Tesla. German cars is the way forward. The Audi and Mercedes EVs are also really great cars.

My BMW is also able so completely self drive the car. Don't really know why only Tesla is bragging about this.
@Brit Dave 2021 ID.4 was better than a TSLA and the 2023 is even better!
They could drop the price and costs by not trying to put so much crap in a car.
ckarabin profile picture
@rambler1 Consumers have long ago told carmakers they would NOT buy spartan cars. So the carmakers discontinued the models.
karmatourer profile picture
@rambler1 Still waiting on the 35k model.
how much can they reduce, remove a seat or something. the cars are already super spartan.

maybe an armrest?
cesar0750 profile picture
New, boss, a lot of change, soon that price cut money going to be replace with laid off.
These aren't real savings.... Go try to buy a model 3 long range and see if you can!
Djreef1966 profile picture
“You too can do what you can for those suffering from inflation!”
truwa profile picture
Ha ha. It is literally game over for ICE vehicles in the US and China.

Model Y Long Range is basically under $40K in the US (adding in tax credits plus savings in fuel an maintenance for 5 years). Nobody expected this.

2 million+ in 2023 is coming! Tesla has ability to make money on the car through service, parts, charging, premium connectivity, subscriptions, paid features, insurance... for the life of the vehicle. That is where this thing is going, this is the plan all along.

ps : Earnings and profits might suffer this year. But when Giga Berlin and Austin fully ramps along with 4680 production, things will change quickly.
Long Player profile picture
@truwa Must be why the stock price is collapsing
Zed Asset Management profile picture
@truwa Over the oast two quarters, Tesla has delivered about 200,000 less cars than it added new orders. These price cuts are to ensure that it can fill its existing factories and continue to ramp Berlin and Austin. Every analyst model had Tesla selling every car it made, so there is no volume advatange to the price cuts. However ASP will be down $10k and Tesla will be lucky to find more than about $3k in COGS savings given battery and semi prices are up, so expect the gross profit per car to be more than halved.

Expect EPS and target prices down 30%-50% on this
@truwa EVs are overpriced grocery getters. The average consumers cannot afford the and range/charge time along with ample public stations are still issues. Considering the 3 Teslas observed on flatbed tow trucks in Yellowstone, they give new meaning to "found on road dead".

Tesla Slashes Prices Up to 20%


Toni Sacconaghi, a Bernstein analyst with the equivalent of a sell rating on Tesla shares, wrote last week that the carmaker was facing “a significant demand problem.”

Note: Consumers who want buy EV now despise Musk and won't buy his cars. This demand problem is going to get worse.

Perhaps Musk should stop building capacity?
Gaucho profile picture
@Amos Tuck no consumers do not despise Musk. The demand problem has just been resolved. By reducing prices to the tax rebate levels the total reduction in price is now over 30%. Demand will explode. The US manufactures have been losing money on every EV and now Tesla will take a lot of their ICE market.

Demand better explode!

Tesla just eviscerated its margins and is trading as a hyper-growth company despite many signs of stagnation.

In preview...

Demand will continue to stagnate, because Musk is tainted, the brand is tarnished, the cars are poorly made (see: Consumer Reports), and competition is rapidly intensifying.

Djreef1966 profile picture
@Amos Tuck Now, they’re on their way to being valued like a car company.
Gaucho profile picture
Hee Hee the 9% price cut in China lead to 30,000 new orders in one week. Tesla was making 40% margin in China before. Tesla is on target to produce 20 million cars a year by 2030.

Tesla China Plant Expansion in Doubt Over Starlink Concerns


"The delay coincides with growing public resentment [in China] toward the US EV maker at a time that tensions between Washington and Beijing are running high."

The Chinese are increasingly disenamored with Musk/Tesla.
ckarabin profile picture
@Gaucho The price slashing drains the system of people sitting on the fence and thus makes it LOOK like it spurred massive car orders. But watch what happens in week 2. Buyers will quickly realize that those price cuts are permanent and thus there is no need to rush to buy. Then orders go back to normal and the car companies plan their next price cuts
Gaucho profile picture
@ckarabin Tesla was always a high priced higher end vehicle. Now with the rebates and the price cuts the cars are as cheap and in some cases cheaper than the ICE vehicles. This will cut into the sales of Ice vehicles especially since the operational cost of a Tesla is far cheaper than that of an ICE vehicle. The price cuts are not a sales item they are permanent and I expect that further reductions will be possible in the future. SALES will remain higher as a result of these price cuts.
Good call .....finally Tesla came to it's senses. Without the fanboys shielding them they would have come to their senses a bit sooner. These fanboys we're great for Tesla in the past but are a scourge for Tesla now. They don't represent a vast majority of normal consumers.

We primarily work from home and I ride my motorcycle most of the time so don't plan to replace our current BMW 5 series and F-150 anytime soon but if and when I am in the market for a new or used car I will be looking at Model Y first
@Reddy531 Yea when you see the interior of that model Y you will come right back to your BMW.
Gaucho profile picture
Tesla raised prices three times last year. They have improved their manufacturing costs and the LFP batteries are being used in many non performance models. This has also had additional cost reductions. So now they can cut prices and keep a very high profit margin.
Long Player profile picture
@Gaucho Gee that must be why the stock is currently dropping like a brick
Gaucho profile picture
@Long Player Yea it hit bottom and has now bounced back. No where to go but up with 44% growth YOY
@Gaucho margins will hurt!! But yes a lot less than their competition. And margins will grow again in later quarters due to scale in Texas and Berlin.
13 Jan. 2023
Cool now fix the quality issues.
Dale Roberts profile picture
What's the 'real' forward PE ratio 60? 70?
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