In a strategic move, Tesla (TSLA) has implemented substantial price cuts for its Model Y in various European countries, following recent reductions in Model 3 and Model Y prices in China. The adjustments in Germany are particularly noteworthy, with the Model Y Standard Range+ seeing a reduction of 4.2%-9.1%. Notably, the price for this model is now 42,900 euros, reflecting a 1,900 euro decrease.
Furthermore, the Model Y Long Range and Performance variants in Germany have witnessed a notable reduction of 5,000 euros, bringing their prices down to 49,900 euros and 55,990 euros, respectively. In other European countries, such as France, the Netherlands, and Norway, the Model Y prices have been slashed by 5.7%-6.7%, 4.3%-7.7%, and 5.6%-7.1%, respectively.
This move comes in the wake of a surge in Model Y inventory in Europe, where sales have experienced a decline in every quarter since Q1. Compounding the challenges, Germany abruptly terminated electric vehicle subsidies on December 17, exacerbating the overall pressure on EV sales.
Despite the reduction in prices, concerns are rising about Tesla’s profit margins for the year 2024. Notably, Tesla Berlin is poised to suspend production for a two-week period starting January 29, attributing the decision to parts-related issues arising from complications in Red Sea shipping.
It’s important to note that while Tesla had already offered significant discounts on Model Y inventory in Europe, the actual selling prices may not drop as much as the newly announced reductions suggest. Past price cuts have been followed by subsequent inventory discounts, adding to the complexity of the market dynamics.
In Tuesday’s market trading, Tesla stock experienced a marginal increase of 0.5%, reaching 219.91 after briefly dipping to 212.18 intraday. The stock is currently trading below its moving averages, following four consecutive weekly declines, including a 7.8% drop last week.
In a parallel development, Tesla had also reduced Model 3 prices by 3.9%-5.9% in China on Friday. Simultaneously, two Model Y variants witnessed reductions ranging from 2.1%-2.8%. The impact of the Model 3 price cuts in China was partially offset by the discontinuation of an insurance subsidy for Model 3 inventory purchases.
Interestingly, Chinese EV manufacturers Li Auto (LI) and Nio (NIO) have announced substantial discounts for their 2023 models in the past week ahead of the anticipated 2024 model facelifts. Additionally, EV giant BYD (BYDDF) disclosed significant price cuts in Germany, having surpassed Tesla in fully electric vehicles in Q4. BYD, which had initially priced its vehicles high in Germany and other European countries, saw a 3.15% decline in stock prices, nearing 10-month lows, despite showcasing advanced driver-assist and smart-car technologies on Tuesday.
The market responded with Li Auto stock sliding 4.3% to a seven-month low, while Nio stock experienced an 8.65% decline, reaching the lowest levels since mid-2020. These developments reflect the ongoing competitive dynamics and pricing strategies in the rapidly evolving electric vehicle market.
