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Detroit, April 7 (BNA): Tesla slashed prices for its entire US electric vehicle model range for the third time this year in an apparent effort to attract more buyers amid rising interest rates.
The largest discounts that appeared Friday on Tesla’s website were $5,000 per car for the company’s more expensive and slower-selling models, the S large and X large SUV, the Associated Press (AP) reports.
The company slashed $2,000 from the price of the Y minivan, its most popular model, and added a lower-cost, twin-engine version at $49,990. The 3 small sedan saw a $1,000 price cut.
The moves come as Tesla’s first-quarter sales grew 36% but fell short of analyst expectations. The company said on Sunday it drove a quarterly record 422,875 vehicles worldwide from January to March, compared with just over 310,000 a year ago. But the increase was less than analyst estimates of 432,000 for the quarter, according to FactSet.
A message was left on Friday seeking comment from Austin, Texas-based Tesla on the reason for the price cut.
Guidehouse Research e-mobility analyst Sam Abuelsamid said the cuts are a sign of slowing demand for Tesla. He said the company needs to sell more cars to keep its factories running at full capacity to protect its high profit margins. “The overhead of underutilized plants is eating into the margin very quickly,” he said.
Tesla has added a massive factory near Austin to its US factory footprint, in addition to its original factory in Fremont, California. The company also built new factories in Shanghai and near Berlin.
Other analysts speculated that Tesla was slashing prices to take advantage of its per-car profit margin, which is larger than most automakers. The move could increase market share and put pressure on the startups and legacy automakers that are now rolling out electric vehicles.
Tesla CEO Elon Musk wrote on Twitter on Friday that demand is constrained by affordability. He wrote, “There is a great demand for our products, but if the price is greater than the money that people have, then this demand is irrelevant.”
The biggest cuts came on Friday due to Tesla’s aging S and X, which saw sales drop 38% from January through March. Price for the twin-motor S trim is down 5.6%, to $84,990, while the S tri-motor Plaid trimmed 4%, to $104,990. The company cut the price of the twin-engine X by 5%, to $94,990, while the X Plaid saw a 4.6% drop, to $104,990.
Tesla added the two-motor Model Y for less than $50,000 and lowered the long-term Y price by 3.7% to $52,990 and by 3.4% on the Y performance to $56,990.
The rear-wheel drive Model 3 saw a price drop of 2.3% to $41,990, with the Performance Edition 3 down 1.9%, to $52,990.
The most recent sale came on Good Friday when the markets are closed.
Tesla cut prices in early March on the S and X, by $5,000 to $10,000. In January, it lowered sticker numbers on several versions of its electric vehicles, making some eligible for a $7,500 federal tax credit. Some versions of the Model Y saw price trims of nearly 20%, and the base price of the Model 3 small car fell by 6%.
The price cuts appear to have increased demand despite higher interest rates designed to slow the economy and rein in inflation. Since the US Federal Reserve started raising interest rates in March last year, the average new car loan has jumped from 4.5% to 7%, according to Edmunds data.
Analysts are watching to see if the price drop reduces the company’s earnings and per-vehicle profit margins. Tesla says it will release its first-quarter earnings after markets close on April 19th.
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