Tesla Price Cut and Tax Credit Reduces Model Y from $67000 to $45000

Tesla cut the prices of their cars in the USA and Europe by up to 23%. This ensures that all by the Model Y performance will get the $7500 tax credit in the US. This price cut and the tax credit means the Model Y is selling for $22,000 less and the Model 3s are…
Tesla Price Cut and Tax Credit Reduces Model Y from $67000 to $45000


Tesla cut the prices of their cars in the USA and Europe by up to 23%. This ensures that all by the Model Y performance will get the $7500 tax credit in the US. This price cut and the tax credit means the Model Y is selling for $22,000 less and the Model 3s are about $12000 less than December 2022.

The Tesla Model Y was costing $67000 to $75000 in December but now is $45000 to 56000 in most situations. This is very near the average price of a US car at $45.5k instead of being $20000 more than the average cost. It was 40-50% over the average price of a new car in the USA and is now 5-20% over the average price. Instead of being double the price of the Honda CRV the Tesla Model Y is only 40% more. The $2000-3000 per year fuel saving with the Model Y makes up the price difference within 4 years of ownership. This aggressive pricing and ten year tax subsidies will hit the Toyota RAV4, Honda CRV, and other compact SUVs hard in the US and Europe. Tesla also had earlier aggressive price cuts in China.

The least expensive Tesla Model Y is $43000 after the tax credit.

The Tesla Model 3 was costing $48000 to $60000 in December but now is $37000 to 45000 in most situations. This is up to 20% below the average price of a US car at $45.5k instead of being $20000 more than the average cost. The $2000-3000 per year fuel saving with the Model 3 makes up the price difference aginst any $29000 ICE car within 3 years of ownership.

The US does not buy many Model 3 like regular four-door cars. The most comparable is a Toyota Camry, Corolla and Honda Accord on the US top seller lists. The Model 3 was already outselling the Honda Accord. The Model 3 is 30% cheaper than it was before and should take huge sales from the Corolla, Camry and the Accord.

The average price paid in the US for a new non-luxury vehicle in December, 2022 was $45,578 which is the highest ever. This includes Ford F-Series which had an average transaction price of $66,451.

I believe that Tesla has the production capacity in 2023 to make 2.5 to 3 million cars. This aggressive pricing means they can produce and sell at capacity. The margins will take a hit but not as bad as most people think. I think it will be a dip to around 15% margin in Q1 and then recovering throughout the year to 20%.

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