Tesla Slashes Prices on Model Y, X, and S in US Amid Slowing Sales

Tesla slashes prices of its EV models in the US amid slowing demand and rising competition, signaling challenges for the company's future growth.

Trim Correspondents
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Tesla Slashes Prices on Model Y, X, and S in US Amid Slowing Sales

Tesla Slashes Prices on Model Y, X, and S in US Amid Slowing Sales

Tesla has reduced the prices of its Model Y, Model X, and Model S vehicles in the US by $2,000 following lower-than-expected sales in the first quarter of 2024.

The price of the Model Y base variant has been cut from $44,990 to $42,990, while the Model X base variant will now cost $77,990.

The price reductions come as Tesla faces slowing demand and increasing competition in the electric vehicle market. Tesla's market share in the US has fallen from 62% at the start of 2023 to 51% now. The slowdown is not limited to the US, with EV sales also declining in other developed markets like Germany, Ireland, Finland, Italy, and Sweden.

The main reason for the slowdown appears to be the high cost of EVs. The average electric car sells for just under $70,000 in the US and Europe, compared to around $30,000 in China. Tesla's cheapest model, the Model 3, still starts at $38,990. Chinese and European automakers are introducing cheaper EV models, putting pressure on Tesla.

Why this matters: Tesla's challenges reflect a broader slowdown in the electric vehicle market, particularly in developed countries. The combination of increasing competition and a marked slowdown in market growth presents a significant challenge for Tesla, potentially leading to further growth slowdowns and margin erosion for the company.

Tesla is also facing other headwinds. The company recently announced a major recall for its new Cybertruck due to a faulty accelerator pedal, with fewer than 4,000 vehicles being recalled, indicating low initial sales. Tesla has also discounted the price of its Full Self-Driving driver assist program from $199 per month to $99 per month, which is concerning given the importance of software sales to the company's business model.

Analysts believe the upcoming Q1 earnings report and conference call will be a "moment of truth" for Tesla and CEO Elon Musk. The company faces demand erosion in China and a debate over whether to prioritize robotaxis or the anticipated entry-level Model 2 EV. Tesla's stock has declined 39.7% year-to-date in 2024 amid these challenges.

Tesla remains a pure EV automaker without the flexibility of legacy automakers who are shifting towards cheaper hybrid vehicles and better-selling gas models. The company's reallocation of resources from the Model 2 to its "farfetched robotaxi plan" has concerned analysts and investors who saw the Model 2 as crucial for Tesla's future growth and earnings. Tesla's success reflects these concerns, having dropped nearly 40% this year as the company's challenges appear less temporary without a daring entry-level vehicle to reinvigorate its financials.

Key Takeaways

  • Tesla cut the prices of Model Y, X, S by $2,000 due to lower-than-expected sales.
  • Tesla's US market share fell from 62% to 51% as competition and high EV costs impact demand.
  • Tesla faces challenges with Cybertruck recall and reduced Full Self-Driving pricing.
  • Analysts see Tesla's Q1 earnings as a "moment of truth" amid demand erosion in China.
  • Tesla's stock has declined 39.7% YTD as it struggles without an entry-level EV model.