Amid demand concerns, Tesla cuts prices by up to $13K in US

Tesla has massively cut prices across new models in the US (update: and Europe), with the largest price drop occurring on the Model Y, which is now $13K and 20% cheaper than it was yesterday.

The changes just happened on Tesla’s website and seem to cover all models.

Over the course of the last year or so, Tesla has continually raised prices on all of its vehicles as demand for EVs has been extremely high. While Tesla’s sales and production have been growing rapidly, demand for EVs has also been growing, and supply of EVs has not been able to keep up.

Other automakers have been raising prices too, though some more modest than others.

But in recent weeks we’ve finally seen some signs that Tesla might need to shore up demand, or at least that the price hikes have gone a little too far. The first and most aggressive cuts so far had been in China, but several other markets are seeing discounts and incentives added to help move vehicles as inventory has grown.

These price drops even led to protests in China from recent buyers who felt like they overpaid, to whom Tesla declined to offer compensation.

Below are the new and old prices for Tesla’s various models in the US. Similar price drops happened in Europe, though you’ll have to look country-to-country for those.

Other configurations, including Performance models, have also received price cuts, with the largest being the $21K (15%) reduction on the “Plaid” Model S. However, there is one significant price hike – the seven-seat option on the Model Y is now $4,000, rather than the $3,000 it used to be.

Among other things, this means that the base five-seat Model Y now qualifies for the $7,500 EV tax credit in the Inflation Reduction Act. The five-seat Model Y configuration was previously left out of qualifying since it’s considered a “car” rather than an “SUV” by government rules, which take into account a number of factors. This means that it needs an MSRP of under $55K to qualify, which base models now do.

So in addition to the $13,000 price drop, the base Model Y is another $7,500 cheaper for those who qualify for the full tax credit, meaning a Model Y ordered today could be more than $20K cheaper than one ordered yesterday – assuming delivery is taken before mid-March, when the tax credit is expected to be reduced to $3,750.

Recently, Tesla CEO Elon Musk called for the government to reconsider this longstanding definition of “SUV,” which has been in place since before the Model Y went into production. He asked his followers to comment on the matter, but the public comment link in question looks to pertain to an annual update to the tax credit form, not to the tax credit qualifications themselves (his company’s lawyers might have told him about this, or he might have read it himself, if he weren’t spending all of his time doomscrolling on Twitter).

Previously, Musk had called for the government not to pass the bill extending tax credits, saying that Tesla did not need these credits to be successful.

Electrek’s Take

After a year of price hikes, it’s about time that we got a few price drops. Tesla may now be the top luxury brand in the US, but the original concept behind the Model 3 and Y were to be the “people’s vehicles,” closer to the low-end of the luxury segment than the mid- or high-end.

The original launch price of the Model 3 was supposed to be $35K, and the Model Y was supposed to be $40K.

Yesterday’s prices of $46,990 and $65,990 (!) didn’t look anything like those original numbers, so it’s great to now see some prices a lot closer – still not quite there, even after the federal tax credit, but closer.

And, while there definitely seem to be demand concerns across various markets, including North America, much of this must be attributable to the large price rises Teslas have seen in the last year. These cuts finally get us heading in the right direction in terms of price, and should spur significant additional demand. But in addition, CEO Musk has been doing his part to turn customers away with his social media antics, causing many people who would otherwise consider Teslas to look at other brands instead.

These price cuts will reverse the price portion of Tesla’s demand concerns, but it remains to be seen whether customers will remain turned off by the brand destruction to which its CEO seems committed.