Rich Benoit did not talk about Tesla for a long time. The last time he did that was to mention how he gave his daughter a Honda Accord to replace Delores because his Model S did not make financial sense anymore: the air suspension collapsed, and the charging port was defective. That shows how Tesla vehicles were not meant to be easy to repair, but that’s another discussion. In his latest video, he focused on Tesla’s price reductions.
According to the creator of the Rich Rebuilds YouTube channel, the EV maker just got prices back to where they were before the international health crisis. Benoit thinks that Tesla just opted for a famous strategy used for Black Friday: charging half of double, which means there is no price advantage whatsoever. To offer a 50% discount on Black Friday, some companies double the prices to make them seem cheap for those who do not keep track of their levels.
The truth is that it is a bit worse than that. The Youtuber forgot or missed a crucial element in Tesla’s strategy: supply prices have not dropped. They are higher than they were before the pandemic for almost every single raw material or component a car has. Lithium, cobalt, nickel, tires, hoses, wiring harnesses… You name it: they are all more expensive than they were three years ago.
That said, the discounts are not due to “a partial normalization of cost inflation.” As Benoit noted in the video, that’s one lame excuse that fits perfectly into the things the Youtuber mentioned that Tesla fans and investors will “keep eating.” The EVs are more expensive to make than they were a while ago, which makes any price reduction turn into what automotive industry experts classify as buying market share.
Tesla has seen its backlogs drop drastically in a matter of months. That means that all the people that were waiting to buy a Tesla either already got one or just went for something else. Tesla just opened two new factories to make the same products it currently has. Although they are still scaling up, that means the company will be able to make more vehicles than it can sell.
Either Tesla reduced its prices to drive demand up, or it decreased production. The EV maker decided to do both, with production cuts in its most productive plant (Giga Shanghai) and lower prices in all its markets. The main consequence was a steep devaluation of Tesla’s used vehicles, which Elon Musk once said would become “appreciating assets.” That’s right the opposite, as Benoit buying his daughter a Honda Accord to reduce maintenance expenses demonstrates. If the electric future implies getting rid of 10-year-old cars because they are just too expensive to fix, it promises to be pretty short.
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