Tesla Slashes Prices After Recalls and Sales Dip

2024-07-22

Recently, things have been looking tenuous for the world’s biggest electric vehicle company, with Tesla announcing price drops for several high-ticket products.

A Troubled Week for Tesla

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EV giant Tesla has cut prices on three of its models in the middle of a very tumultuous time, which included the recall of thousands of Cybertrucks and the announcement of mass layoffs in the company.

Price Cuts Declared

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The first price cuts were announced were initially exclusive to US buyers before being extended to international markets including China and Germany.

3 of 5 Models Reduced

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The price reductions applied to 3 of the 5 vehicle models that are currently on the market, including the Model Y, X, and S. All vehicled starting prices were cut by $2,000 per model.

Big Move for the Company

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It’s a significant move by Tesla. The Model Y is its top-selling model in the US, and the X and S are some of its most expensive products.

Full Self-Driving System Included

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As if the initial cuts weren’t enough, the company also announced a price reduction for the “Full Self-Driving” system, their driving assistant software. The price was slashed by a third, from $8000 to $12000.

International Price Changes

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New prices were released for China and Germany, and a company spokesperson announced their intention to cut prices in countries across Europe, the Middle East, and Africa.

Model 3 and Cybertruck Not Included

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So far, prices for the Model 3 and Cybertruck remain unchanged across all countries.

Significant Decline in Sales

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Many speculate that the drop in prices is the company’s newest move to mitigate disappointing quarterly results. The report for the first quarter of 2024 showed a year-over-year sales decline, a rare result for the leading EV company.

First Drop in Four Years

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Despite producing 433,000 electric vehicles in the last quarter, the company only delivered approximately 387,000. It is the first time quarterly sales have dropped in almost four years.

Company Shares Fall

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The sale also came just one day after company stocks dropped below $150 per share.

Competition Rears It’s Head

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Price changes may also be a result of mounting competition from Chinese EV manufacturers like BYD, which have become increasingly able to produce more affordable electric vehicles more quickly.

Musk Defends Price Changes

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CEO Elon Musk took to social media to defend the price changes after the announcement, telling his followers “Other cars change prices constantly and often by wide margins via dealer markups and manufacturer/dealer incentives.”

Matching Production With Demand

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“Only a fool thinks the “MSRP” is the real price,” he continued, referring to the Manufacturer’s Suggested Retail Price. “Tesla prices must change frequently in order to match production with demand.”

Trial by Fire for Tesla

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But fierce competition, plummeting share prices, and quarterly underdelivering aren’t the only problems Tesla has faced recently.

Layoffs Announced

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The company also publicly announced its intentions to lay off 10% of its global workforce, amounting to approximately 14,000 positions.

“Cost Reductions and Increased Productivity”

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“As we prepare the company for our next phase of growth, it is extremely important to look at every aspect of the company for cost reductions and increasing productivity,” Musk explained in a staff memo announcing the layoffs.

“A Difficult Decision”

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“As part of this effort, we have done a thorough review of the organization and made the difficult decision to reduce our headcount by more than 10% globally,” it continued.

The Cybertruck Recalled

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Just two days after the workforce announcement, Tesla made headlines again after the company voluntarily recalled 3878 Cybertruck models due to faulty accelerator pads that had increased the risk of crashes.

Musk Under Scrutiny as CEO

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CEO Musk has also been criticized for overextending himself, as an active CEO of both Tesla and his globally popular social media platform X, formerly known as Twitter.

Not the First Time

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The recent price cuts aren’t the first for Tesla. Early last year the company responded to mounting competition by aggressively slashing vehicle prices by as much as 20%, at the expense of profit margins.

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The content of this article is for informational purposes only and does not constitute or replace professional financial advice.