Photo: Tesla
Tesla's dynamic pricing seems to confuse potential buyers, who are having difficulties timing the market. Elon Musk explained that this is happening because of Tesla's direct-to-consumer sales model, which makes everything faster and more transparent.
Tesla doesn't sell its electric vehicles through a dealer network. Instead, it sells them directly to customers who order on its website. This allows more flexibility, better control over pricing and inventory, and increased margins. It's not by chance that Tesla is the only carmaker making money from selling electric vehicles. Having your own distribution channel pays.
Whereas other carmakers report a vehicle sold after being shipped to a dealership, Tesla does the same when it is already delivered to a customer. This is why Tesla immediately knows how many vehicles it sold and how many are in transit or in inventory. This allows it to match production with demand swiftly and gauge the pricing accordingly. The latter is confusing people, especially as Tesla has sent mixed signals in the past month.
Recently, the EV market leader decided to increase the price of the Model Y by $1,000 after announcing the move in March. This probably wasn't the best decision Tesla could've made, considering that the first-quarter sales were not impressive. The Model Y is credited with inflating Tesla's inventory to an all-time high at the end of March. However, Tesla needed this demand lever to increase sales in the first quarter. That's why it told its customers to buy a Model Y in March because it would be more expensive from April.
Raising the Model Y price by $1,000 from April 1 was expected, although you can consider it an April Fool's prank. While Tesla raised the Model Y price, it also offered sizeable discounts for vehicles in its inventory. Some confirmed they bought a Model Y with a $5,200 discount in the first week of April. However, this didn't take long. Two weeks later, the EV maker removed all inventory discounts and offered more aggressive leasing terms instead.
People predicted that Tesla was done with its price war, and I also believed this. However, it was far from over. It appears that Tesla's dynamic pricing is hard to keep up with, as new price cuts were operated just one day after I published my story. In the latest price cut round, Tesla slashed $2,000 off all models except the Model 3 refresh and the Cybertruck.
This price rollercoaster is confusing to customers. It wasn't that bad in the previous years. Tesla prices were either going down or up for extended periods. This allowed people to speed up their purchases or delay them accordingly to benefit from the most favorable prices. Not anymore. There's no way to predict the price of a Tesla Model Y one month from now. Should you buy one now or wait for the next price cut? That's maddening.
This is why Elon Musk intervened to explain what was going on. Musk said that frequent price changes are necessary to match production with demand. He also explained that legacy brands make similar adjustments via dealer markups and manufacturer and dealer incentives. They are less transparent, though, and everyone walking into a dealership gets their own price. This makes Tesla's strategy better because you can see the price on its website and don't have to negotiate it with the dealer.
Whereas other carmakers report a vehicle sold after being shipped to a dealership, Tesla does the same when it is already delivered to a customer. This is why Tesla immediately knows how many vehicles it sold and how many are in transit or in inventory. This allows it to match production with demand swiftly and gauge the pricing accordingly. The latter is confusing people, especially as Tesla has sent mixed signals in the past month.
Recently, the EV market leader decided to increase the price of the Model Y by $1,000 after announcing the move in March. This probably wasn't the best decision Tesla could've made, considering that the first-quarter sales were not impressive. The Model Y is credited with inflating Tesla's inventory to an all-time high at the end of March. However, Tesla needed this demand lever to increase sales in the first quarter. That's why it told its customers to buy a Model Y in March because it would be more expensive from April.
Raising the Model Y price by $1,000 from April 1 was expected, although you can consider it an April Fool's prank. While Tesla raised the Model Y price, it also offered sizeable discounts for vehicles in its inventory. Some confirmed they bought a Model Y with a $5,200 discount in the first week of April. However, this didn't take long. Two weeks later, the EV maker removed all inventory discounts and offered more aggressive leasing terms instead.
People predicted that Tesla was done with its price war, and I also believed this. However, it was far from over. It appears that Tesla's dynamic pricing is hard to keep up with, as new price cuts were operated just one day after I published my story. In the latest price cut round, Tesla slashed $2,000 off all models except the Model 3 refresh and the Cybertruck.
This price rollercoaster is confusing to customers. It wasn't that bad in the previous years. Tesla prices were either going down or up for extended periods. This allowed people to speed up their purchases or delay them accordingly to benefit from the most favorable prices. Not anymore. There's no way to predict the price of a Tesla Model Y one month from now. Should you buy one now or wait for the next price cut? That's maddening.
This is why Elon Musk intervened to explain what was going on. Musk said that frequent price changes are necessary to match production with demand. He also explained that legacy brands make similar adjustments via dealer markups and manufacturer and dealer incentives. They are less transparent, though, and everyone walking into a dealership gets their own price. This makes Tesla's strategy better because you can see the price on its website and don't have to negotiate it with the dealer.
I think that if you had a monkey throw shit at a keyboard to come up with a pricing strategy for Tesla it would be more coherent than what we’ve seen.
— Whole Mars Catalog (Supervised) (@WholeMarsBlog) April 21, 2024
Subscription price will go up once we release FSD. Actually we will cut it. We are raising Model Y prices. Actually now we are…
why not instead try a mass advertising & educational campaign? it would cost less than price cuts. people are still widely unaware of the benefits of Tesla ownership.
— Mayur मयूर Thaker ठाकर (@freshjiva) April 21, 2024
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