Price cuts at Tesla: what's happening?

The end of last week was turbulent for Tesla. It reduced prices of its models in the United States, Europe and China. The new Model 3, for example, lowered its price to 231,900 yuan (29,830 euros, a reduction of about 2,000 euros compared to the previous price). And in Germany, the best-selling Model 3, the one with propulsion, fell in the same proportion, to 40,990 euros from the 42,990 euros indicated on the manufacturer's website since February. In the United States, the Model Y, Model X and Model S dropped their price by $2,000 on Friday.

These are three examples of the three main markets in the countries where Tesla has factories. These price cuts were also seen in other countries in Europe, the Middle East and Africa, a Tesla spokesperson told Reuters.

This movement is linked to an irrefutable fact: Tesla shares have fallen 40% so far this year. The stock is the second-worst performer in the S&P 500 for the year. What is this movement due to? Well, several factors have come together:

  • First drop in sales: Tesla announced that its global sales in the first quarter fell 8.5%, to 386,810 units. It is the first time that it has announced a year-on-year drop in deliveries… and there were movements, since last week it announced that it was laying off more than 10% of its workers.
    It is not something that only happens to the North American manufacturer. It is a fact that the demand for electric cars has slowed down around the world. And since the factories do not stop immediately, there is more and more supply and price wars begin, especially against Chinese rivals like BYD. Tesla also took too long to update its range… and in some aspects it is clear that it has also made the products cheaper.

  • Doubts in the autonomous driving bet: Much of a stock's price corresponds to what the market believes it may be in the future. The company was perceived as a pioneer in the field of autonomous driving. But Autopilot is already behind other manufacturers such as Mercedes or Ford. The software of these rivals already allows level 3 autonomous driving – without holding the steering wheel – in some environments… Tesla's, after 10 billion dollars of investment, is not enough.
    Elon Musk is betting that technology will become an important source of income but the market does not see it that way yet. In the United States they have already lowered the price of driver assistance software (Full Self-Driving, or FSD) by a third. At the same time they announce a big push for robotaxi in August.
  • Problems with latest releases: The Tesla Cyberturck is an electric pick-up that promised to be disruptive. After seeing that its autonomy and performance off the asphalt are not as promised, the imbalances in the panels that form it, that it must be washed so that it does not get damaged… now it was time to remove almost 3,900 units to repair or replace the accelerator pedals. They could become detached and cause the vehicle to accelerate unintentionally, increasing the risk of an accident.
  • There are no signs of new models: Many think that it is time to focus efforts on a Tesla Model 2 for access to the range. In fact, Reuters reported on April 5 that it was ruling it out of its plans to promote the robotaxis project. Musk published in Investors are asking for clarity.

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