Tesla recently lowered prices on its entire Model S3XY lineup in the United States, with some vehicle variants receiving discounts as high as 20%. This move has had a ripple effect across the automobile industry and has put pressure on competitors in the EV market.
The price reductions have received mixed reactions among investors and Wall Street analysts. Some argue that the move is a response to declining demand, while others argue that it is a strategy to put pressure on competitors, particularly since popular variants of vehicles like the Model 3 and Model Y are now eligible for a $7,500 federal tax credit.
According to Bank of America analyst John Murphy, traditional car manufacturers, particularly those without Tesla’s scale in electric cars, are currently facing challenges in terms of profit margins or are losing money on their respective plug-in offerings. He suggests that Tesla’s recent price cuts may lead to further cost reduction efforts from rival car companies or even potentially trigger a price war in the EV segment.
General Motors and Ford, veteran automakers have responded to Tesla’s price cuts differently. A spokesman for General Motors has noted that the lower prices of the S3XY lineup has not had any significant impact on GM. A spokesperson for Ford, on the other hand, noted that the veteran automaker reported record sales for its Mustang Mach-E all-electric crossover last year and the demand for its EV lineup, which includes the F-150 Lightning, has been high.
Despite Tesla accounting for about 65% of the total electric vehicle sales in the United States in 2022, both the GM CEO Mary Barra and Ford CEO Jim Farley have set the goal of eventually surpassing Tesla as the top-selling EV in the country at some point in the future.
Additionally, the price cuts seem to have caused a rise in interest in Tesla’s electric cars. According to Edmunds, the number of people researching Tesla vehicles increased significantly after the price cuts were announced. Tenet, a firm that specializes in providing financing services to EV buyers, also observed that applications for Tesla vehicle financing tripled soon after the S3XY lineup’s price cuts in the United States were rolled out.
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