Tesla (TSLA) increases discount on cars delivered this month

Tesla (TSLA) is increasing the discount, or price adjustment, as it calls it, to $7,500 on all Model 3 and Model Y vehicles delivered this month.

As we have recently reported, Tesla is having some rare demand issues lately – especially in the United States due to unique circumstances.

It has been years since Tesla hit 200,000 deliveries in the United States, which meant the company no longer qualified for the US federal tax credit for electric vehicles. But Tesla buyers are expected to regain access to the incentive, which is valued at up to $7,500, soon.

As the incentive is being put in place for 2023, buyers need to take delivery of their vehicles on or after January 1 to qualify.

This situation is incentivizing buyers to wait until after the new year to purchase a Tesla vehicle in the United States. We reported last month that it also contributed to an increase in cancellations as Tesla is not allowing buyers to delay orders to get them next month.

Earlier this month, we learned that Tesla started offering a $3,750 discount to buyers in order to combat this issue. The amount was interesting since it is half of the full $7,500 tax credit.

Later, the automaker also started to offer 10,000 free supercharging miles to people taking delivery in December.

Now Electrek has learned that Tesla has now authorized staff to increase the discount to $7,500 for Model 3 and Model Y vehicles being delivered by the end of the month, according to sources familiar with the matter.

Elon Musk famously said that Tesla doesn’t do discounts. However, the automaker is calling this a price adjustment.

As we reported earlier today, Tesla plans to implement a hiring freeze and a new round of layoffs as investors are increasingly worried after the stock price dropped more than 60% this year.

Electrek’s Take

It looks like Tesla is having some serious problems selling cars this month, but we anticipated that it would get more difficult as we get closer to the end of the month.

The amount and the timing of the change in the discount are interesting.

Top comment by bossfan

Liked by 35 people

Tesla has many advantages by selling direct to consumers. This is a very painful downside of not having franchised dealers. GM can produce like crazy this month and recognize the sales revenue as soon as the vehicles get on a transport, the dealers take the hit until January 1. Tesla has to make a choice among three terrible alternatives:

  1. Reduce production to align with deliveries they can ensure take place this year

  2. Continue production normally and be ready to deliver tons of cars in January but take an awful earnings hit for Q4

  3. The one they have chosen, continue with high volume but eat $7,500 per car sold the last 10 days of the year

This move tells me they are more worried about volume than margin at this point in the quarter, it will be interesting to see how this plays out.

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As we noted when Tesla offered $3,500, that’s half of the full discount or what customers would get if the electric vehicle didn’t meet the battery material requirements.

We thought it could potentially indicate that Tesla expected not to get the full discount or it thought that offering buyers half of the discount would be enough to convince them to pull the trigger right now.

Now the discount has been increased to $7,500 and comes just after we learned that virtually all EVs produced in North America will get the full tax credit during the first quarter of 2023 because the US Treasury has delayed its battery material guidance until March.

It could explain the change in the discount.

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