Photo: Tesla | Edited
Tesla lowered the price of the Model 3 RWD to compensate for the loss of half the IRA tax credit. Intriguingly, the EV maker also cut the prices of the Model Y range even as they continue to benefit from the full $7,500 credit.
When the IRS released the rules of origin for battery components, it was believed that the Tesla Model 3 RWD would not benefit. The LFP cells in its battery packs were imported from China, the very thing that the IRA was trying to dissuade. Surprisingly, Tesla managed to qualify the Model 3 RWD for a $3,750 credit, which still represents a $3,750 loss compared to the first quarter. Seeing Elon Musk's mindset for price cuts, we predicted that Tesla would compensate by lowering the Model 3 RWD price.
The price cut came in later than expected, but it's now official. The Model 3 RWD is $2,000 cheaper in the US, starting at $39,990. At the same time, Tesla has kept the Model 3 Performance price unchanged. We're confident that this will change, too, considering that the performance sedan is now price-squeezed by the Model Y Performance. Thanks to a healthy $3,000 price cut, the Tesla Model Y Performance is currently $53,990, only $1,000 more expensive than the Model 3 equivalent.
Not only the Model Y Performance saw a price cut, but the entire Model Y range. The entry-level Model Y AWD with 4680 cells is now $46,990, while the Long Range variant is $49,990, both $3,000 cheaper than before. The decision to cut the Model Y prices across the range is surprising, considering that the electric crossover is the most in-demand model in Tesla's lineup. Slashing the prices a day before the Q1 2023 earnings call is also controversial, unless Elon Musk is trolling investors.
Tesla's "serial" price cuts in the past months have rattled investors, who argued that such moves diminish the company's margins and affect stock value. Elon Musk, on the other hand, says he prioritizes volumes over profits, as he aims for extreme scale. We must give him credit since the market is moving in the right direction, with plummeting lithium prices and easing inflation. With two new gigafactories ramping up production and the recent cost-cutting measures, Tesla is better positioned to benefit than before the pandemic.
It should be noted that Tesla is lowering prices after two years of constant price hikes. The most affordable Model Y variant, the standard-range RWD, cost $39,990 in Q1 2021, with the Long Range variant at $49,990 and Performance at $60,990. Two years later, the most affordable version (AWD) costs $46,990 and the Long Range variant is still $49,990, although the Model Y Performance is now $53,990. Tesla reported a 26.5% gross margin in Q1 2021, and it should maintain a healthy margin even after slashing the prices.
Even so, we expect Tesla to be bombed with questions about the price cuts and automotive margins during the Q1 earnings call. According to Tesla's Investor Relations webpage, Martin Viecha will attempt to answer the questions. A more significant event will be the 2023 Annual Shareholder Meeting, scheduled for May 16.
The price cut came in later than expected, but it's now official. The Model 3 RWD is $2,000 cheaper in the US, starting at $39,990. At the same time, Tesla has kept the Model 3 Performance price unchanged. We're confident that this will change, too, considering that the performance sedan is now price-squeezed by the Model Y Performance. Thanks to a healthy $3,000 price cut, the Tesla Model Y Performance is currently $53,990, only $1,000 more expensive than the Model 3 equivalent.
Not only the Model Y Performance saw a price cut, but the entire Model Y range. The entry-level Model Y AWD with 4680 cells is now $46,990, while the Long Range variant is $49,990, both $3,000 cheaper than before. The decision to cut the Model Y prices across the range is surprising, considering that the electric crossover is the most in-demand model in Tesla's lineup. Slashing the prices a day before the Q1 2023 earnings call is also controversial, unless Elon Musk is trolling investors.
Tesla's "serial" price cuts in the past months have rattled investors, who argued that such moves diminish the company's margins and affect stock value. Elon Musk, on the other hand, says he prioritizes volumes over profits, as he aims for extreme scale. We must give him credit since the market is moving in the right direction, with plummeting lithium prices and easing inflation. With two new gigafactories ramping up production and the recent cost-cutting measures, Tesla is better positioned to benefit than before the pandemic.
It should be noted that Tesla is lowering prices after two years of constant price hikes. The most affordable Model Y variant, the standard-range RWD, cost $39,990 in Q1 2021, with the Long Range variant at $49,990 and Performance at $60,990. Two years later, the most affordable version (AWD) costs $46,990 and the Long Range variant is still $49,990, although the Model Y Performance is now $53,990. Tesla reported a 26.5% gross margin in Q1 2021, and it should maintain a healthy margin even after slashing the prices.
Even so, we expect Tesla to be bombed with questions about the price cuts and automotive margins during the Q1 earnings call. According to Tesla's Investor Relations webpage, Martin Viecha will attempt to answer the questions. A more significant event will be the 2023 Annual Shareholder Meeting, scheduled for May 16.
automotive gross margin in Q1 2021 — 26.5%
— Whole Mars Catalog (@WholeMarsBlog) April 19, 2023
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