Tesla has reduced the price of some Model Y and Model 3 electric vehicles in the United States, despite a drop in net income when compared to the previous year, and in light of the increasing price of production of lithium batteries.
The recent price slash is coming nine days after the last price cut and was made a few hours before the EV maker announced its first-quarter earnings.
Tesla also did not announce the new price cut which is the seventh time the Texas-based automaker will be reducing the price of its electric cars this year. It is believed that the Elon Musk owned company is looking to offset the fact that not all of its vehicles qualify for the recently revised US federal tax credits.
Tesla’s website showed that it cut prices of its Model Y “long-range” and “performance” versions by $3,000 each and of its Model 3 “rear-wheel drive” by $2,000 to $39,990.
The multiple reductions have resulted in the price of the base Model 3 crashing by 11% this year and that of its base Model Y by 20%.
Tesla also reported that its net income fell 24% to $2.51 billion, or 73 cents a share, from $3.32 billion, or 95 cents a share, the previous year.
Shares in electric vehicle maker dropped by over 4% after the company reported its first-quarter earnings on Wednesday.
- Earnings per share:85 cents adjusted vs 85 cents expected, according to the average analyst estimate compiled by Refinitiv
- Revenue:$23.33 billion vs $23.21 billion expected, according to Refinitiv estimates
Giving reasons for the drop in revenue, Tesla blamed “underutilization of new factories” stressed margins, along with higher raw material, commodity, logistics, and warranty costs, and lower revenue from environmental credits”. Stiff competition from other electric vehicle makers like Rivian and Ford, both in the United States and China could also play a role.
On an earnings call, Elon Muskemphasized an “uncertain” macroeconomic environment that could impact people’s car-shopping plans. During a question-and-answer session with analysts, Musk said he expected 12 months of “stormy weather” in the economy.
He cautioned that “Every time that the Fed raises interest rates, that’s the equivalent to an increase in the price of a car.” He also added that, whenever there’s uncertainty in the economy, people will generally postpone “big new capital purchases like a new car.”
Tesla also took its price-cutting campaign to markets outside the United States to countries including Europe, Israel, Singapore, Japan, Australia, and South Korea.
Earlier this month, Tesla announced it was reducing the price of the Model S and Model X by $5,000, $2,000 was taken off the Model Y, and $1,000 off the Model 3 sedan.
The basic version of Tesla’s Model S is now $84,990, down from $89,990 at the beginning of March. At the same time, the Model X plaid has now been lowered to $94,990 on the website. Neither would have qualified anyway so many potential buyers may see this as a bonus, and eschew a more expensive Lucid Air or some other non-Tesla vehicle.
