Title: Elon Musk Plans to Further Lower Tesla Prices Amidst Price War
Date: 20/07/2023 17:00
Updated: 07/22/2023 09:03
Elon Musk, CEO of Tesla, has achieved several milestones for the company, including becoming the world‘s largest electric car company, popularizing zero-emission vehicles, and securing the top-selling car spot in Europe. However, Musk is not content and aims to go even further by lowering the prices of Tesla models, despite already being priced lower than competitors.
This surprising decision comes after Tesla signed a peace agreement with various Chinese manufacturers whom the company had harmed due to price drops. However, the Chinese Administration nullified the agreement in its entirety, leading to a continued “price war” among Tesla and other signatory brands. This ongoing dispute threatens to drive some brands out of the market.
In an effort to increase sales, Tesla is willing to significantly reduce profit margins. Musk publicly announced that prices of their electric vehicles will be lowered again, especially during “turbulent times.” He expressed uncertainty about the state of the world economy and his determination to navigate these challenges.
While this move may positively affect sales, reducing Tesla’s profit margins further could cause concerns for investors and company officials. As expected, Musk’s comments had an initial impact, with Tesla shares dropping about 5% afterward. Nevertheless, the shares still maintained overall growth, indicating that investors remain confident for now.
Despite objections from skeptics who argue that pushing gross margins to unsustainable levels could be financially destructive for Tesla, Musk remains committed to sacrificing profit margins for the sake of volume growth.
However, there is a potential downside to Musk’s strategy. If potential buyers learn that prices are set to drop, they may delay purchasing in order to save money, contradicting Musk’s intention to spur sales.
Notably, Tesla has consistently lowered prices on its electric cars in recent months. Currently, a Tesla Model 3 can be purchased in Spain for €39,990, which can be further reduced to around €32,000 with state aid from the MOVES III Plan. Similarly, the Tesla Model Y, the best-selling car in Europe, starts at €46,490 but can potentially be obtained for less than €40,000 with the aid plan.
As Tesla continues to disrupt the market with its aggressive pricing strategy, the outcome of this price war and its implications for the industry remains uncertain. Investors and industry stakeholders will closely watch Tesla’s future moves and their impact on the electric car market.