{"id":40694,"date":"2023-01-19T00:03:42","date_gmt":"2023-01-19T05:03:42","guid":{"rendered":"https:\/\/autosector.com\/?p=40694"},"modified":"2023-01-19T00:03:42","modified_gmt":"2023-01-19T05:03:42","slug":"tesla-electric-car-price-war","status":"publish","type":"post","link":"http:\/\/autosector.com\/?p=40694","title":{"rendered":"Tesla Is on both offense and defense in its price war – Autoblog"},"content":{"rendered":"

There are several ways to look at Tesla\u2019s deep price cuts in the U.S. and Europe<\/a>, which came on the heels of two rounds of reductions in the span of 10 weeks in China<\/a>.<\/p>\n

For the glass-half-empty crowd, it\u2019s clear that the carmaker was struggling to drum up orders. The company produced over\u00a034,000 more vehicles than it delivered in the fourth quarter \u2014\u00a0not a catastrophic difference, but part of an un-Tesla-like trend. After all, Chief Executive Officer Elon Musk<\/a> told investors in October that the company expected\u00a0to sell every car it could make, \u201cfor as far in the future as we can see.\u201d<\/p>\n

\u201cTesla<\/a>\u2019s recent price cuts were in response to a demand problem,\u201d Toni Sacconaghi, a\u00a0Bernstein analyst with the equivalent of a sell rating on the stock, wrote to clients Tuesday. \u201cWhile we (and many investors) had expected price cuts, they were bigger and came earlier than we expected.\u201d<\/p>\n

For the glass-half-full contingent, Musk just started a pricing war that Tesla stands a strong chance of winning, even if emerging unscathed is out of the question. By one projection, the cuts could boost sales volume by 53%<\/a>\u00a0and overall global demand by 12%-14%<\/a>, even though the move has angered some existing customers<\/a>.<\/p>\n

There\u2019s no debating that slashing 20% off the cost of the Model Y<\/a> and making performance versions of the Model S<\/a> and X roughly $20,000 cheaper\u00a0will pressure profitability. But Tesla is soundly out-earning other EV companies, and with the exception of China\u2019s BYD, no automaker is anywhere close to producing as many electric cars<\/a>.<\/p>\n

\u201cTesla has higher margins than other OEMs including GM<\/a> and Ford<\/a>, and cushion to lower prices even further,\u201d\u00a0John Murphy, a\u00a0Bank of America analyst with the equivalent of a hold rating on the EV maker\u2019s stock, said Tuesday. \u201cMost OEMS are currently losing money on EVs, and these price cuts are likely to make business even more difficult, just as they are attempting to ramp production of EV offerings. OEMs will have to reevaluate investments and whether they generate sufficient returns should EV pricing prove less favorable.\u201d<\/p>\n

Tesla almost went bankrupt during the great recession that was getting underway roughly 15 years ago. The company then grew\u00a0in part thanks to a long period of low interest rates, easy access to\u00a0capital and little competition.<\/p>\n

That\u2019s all changed. The Federal Reserve\u2019s rate increases have raised borrowing costs, and Tesla is no longer the only game in town. BYD is surging in China, Volkswagen<\/a> is fighting to protect its turf in Europe, and Ford and General Motors<\/a> doing the same in the U.S.<\/p>\n

Musk is determined to position Tesla for continued expansion after the company fell short of its target for growth in vehicle deliveries last year. Cutting the prices of the Model 3<\/a> and Y\u00a0will make more of those models eligible\u00a0for new US tax credits introduced by\u00a0the Inflation Reduction Act.<\/p>\n

During a Twitter Spaces\u00a0conversation last month, Musk predicted a serious recession this year and warned consumers will cut back on\u00a0big-ticket purchases. He called higher interest rates and lower demand a \u201cdouble-whammy,\u201d\u00a0and said Tesla faced a choice.<\/p>\n

\u201cDo you want to grow unit volume, in which case you have to adjust prices downward? Or do you want to grow at a lower rate, or steady?\u201d Musk asked, rhetorically.\u00a0\u201cMy bias would be to say let’s grow as fast as we can without putting the company at risk.\u201d<\/p>\n

In that scenario, Tesla\u2019s CEO said profits would be \u201clower to negative\u201d during the recession, on the condition that its\u00a0cash position is sound.<\/p>\n

\u201cI think that’s still the right move, long-term,\u201d Musk said.<\/p>\n","protected":false},"excerpt":{"rendered":"

There are several ways to look at Tesla\u2019s deep price cuts in the U.S. and Europe, which came on the heels of two rounds of reductions in the span of 10 weeks in China. For the glass-half-empty crowd, it\u2019s clear that the carmaker was struggling to drum up orders. The company produced over\u00a034,000 more vehicles […]<\/p>\n","protected":false},"author":1,"featured_media":8313,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[2],"tags":[],"class_list":["post-40694","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-industry"],"_links":{"self":[{"href":"http:\/\/autosector.com\/index.php?rest_route=\/wp\/v2\/posts\/40694","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/autosector.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/autosector.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/autosector.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/autosector.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=40694"}],"version-history":[{"count":0,"href":"http:\/\/autosector.com\/index.php?rest_route=\/wp\/v2\/posts\/40694\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"http:\/\/autosector.com\/index.php?rest_route=\/wp\/v2\/media\/8313"}],"wp:attachment":[{"href":"http:\/\/autosector.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=40694"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/autosector.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=40694"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/autosector.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=40694"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}