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Tesla claims EV price cuts made possible by cost normalization.

Published: 2023-01-14

The morning after Tesla's massive price cuts, which in the United States were as high as 20% on individual electric vehicle modifications, the news feeds were full of headlines with metaphors about "canaries in a coal mine." The price cut for electric vehicles of this brand was perceived by many as an attempt to stimulate demand in the face of growing competition. Tesla itself prefers to talk about reducing its own costs and the willingness to share this benefit with customers.

Elon Musk does not like spending money on public relations specialists, but its representatives in Germany, according to Electrek, gave just such an explanation for the brand's recent decline in prices for electric vehicles around the world: “At the end of a turbulent year with disruptions in supply chains, we were able to achieve a partial normalization of cost inflation, which allows us to share this benefit with our customers with confidence.” Approximately in the same vein, the leaders of the Chinese division of Tesla commented on the situation, which lowered prices among the first.

Tesla electric vehicles of individual modifications after the price adjustment will be able to qualify for government subsidies not only in the United States, but also in France. In the latter case, the subsidy threshold is around 47,000 euros, and Model 3 in this country can now be bought for 44,990 euros and qualify for a subsidy of 5,000 euros.

Notably, Tesla's move to lower the price of its electric vehicles has had idiosyncratic repercussions for the stock market. According to the results of Friday trading, its own shares, although they sank at the moment by 6.4%, ended the session with a decrease in the rate by 0.9%. Competitors were hit much harder, with General Motors down 4.5%, Ford Motor down 6%, Stellantis down 3.7% and Volkswagen down 3.6%. Fledgling electric car makers, who will inevitably have to compete with Tesla, were hit even harder, with Fisker's share price down nearly 9.7%.

Wedbush Securities analysts estimate that Tesla's price cuts will boost EV deliveries by 12% to 15% this year. Ultimately, price cuts were aimed at achieving this goal, since even in the example of Tesla's Shanghai plant, it was noticeable that supply began to outstrip demand. At the same time, the company is not going to slow down its expansion and maintains a fairly high rate of return due to the vertical integration of production processes, so the price reduction in the current conditions will be painless for it.