While the shock comes as no surprise, the more interesting part will be how it impacts rival brands' future pricing and offerings. S inc...
While the shock comes as no surprise, the more interesting part will be how it impacts rival brands' future pricing and offerings.
Since it has been quite clear for some time that Tesla's margins are likely impressively high, it was able to not only drop prices on its whole lineup recently, but also drop them in a massive and surprising manner. Not long after Tesla's 2022 end-of-year discounts and incentives, it upped the ante much higher. For example, the Model Y's starting price dropped from $65,990 to $52,990, and now it's eligible for a $7,500 US federal EV tax credit on top.
Tesla's prices have been arguably too high for a time, and they kept going up in 2022. The demand for the vehicles was reportedly very high, and wait lists were growing. People were waiting many months to take delivery, and some may have been giving up on Tesla and buying competing models, though most rivals' EVs were also hard to come by.
After Tesla was unable to meet its delivery guidance of 50 percent growth from 2021 to 2022, it announced the significant price cuts on all of its cars in the US. Meanwhile, the US EV maker was also dropping prices in many other areas across the globe.
While the automaker is likely to see a dip in revenue as a result of the discounts, it seems it's selling cars more quickly than ever, which is making an impact on many facets of the US and global automotive industry as a whole. And while Tesla's stock seemed to go even lower when the price cuts first appeared, it appears it's beginning to rally due to the spike in sales.
According to recent reports shared by Teslarati, many carmakers, especially those that don't offer many EVs, are having a tough time with profit margins, to the point that they're losing money. The lost revenue is actually coming from these OEMs' plug-in sales, since they're not able to produce EVs yet with huge margins like Tesla, and they may have to lower their prices notably to encourage continued sales. Bank of America analyst John Murphy explained,
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