Tesla Lowers Prices Again in the US Ahead of Earnings Announcement

"6th Time This Year"

American electric vehicle company Tesla has implemented its sixth price reduction this year. This move is interpreted as a desperate measure to achieve its annual sales target amid declining demand due to recession forecasts.

On the 18th (local time), major foreign media outlets including Bloomberg reported that Tesla has again lowered the US sales prices of its Model Y and Model 3 vehicles. This is Tesla's sixth price cut this year and the second just this month.

Accordingly, the US prices of the Model Y Long Range and Model Y Performance have each been reduced by $3,000. The price of the Model 3 Standard Range (rear-wheel drive) model has dropped by $2,000 to $39,990 (approximately 52.97 million KRW).

Tesla began its price reduction strategy in January in the US and has since extended it to global markets including China, Europe, Israel, and Singapore.

The apparent reason for Tesla's price reduction strategy is to respond to weakening demand. Earlier this year, CEO Elon Musk explained to investors that "even very small price changes have a significant impact on demand."

To achieve the company's annual sales target of 2 million units this year, a sales growth rate of 52% is required. Since the sales growth rate in the first quarter was 36% compared to the same period last year, which fell short of the target, the growth rate for the remaining quarters 2 through 4 must exceed 52%.

[Image source=Reuters Yonhap News]

However, some argue that the price reduction strategy is a tactic to shake competitors through a chicken game. As competition intensifies in the electric vehicle market and Tesla's dominant market position weakens, the company is attempting to curb rivals' chasing capabilities through aggressive price cuts.

Tesla's price reductions have spread to other electric vehicle manufacturers. US automaker Ford recently lowered the price of its Mustang Mach-E, a competitor to Tesla, and electric vehicle startup Lucid, which focuses on luxury EVs, has also joined the price-cutting competition.

Some electric vehicle companies that have not achieved economies of scale remain trapped in a structure where selling more results in losses due to external factors such as rising battery raw material costs. As a result, Ford, which holds the second-largest market share in the US electric vehicle market after Tesla, recorded a $2.1 billion loss last year due to global supply chain disruptions and rising raw material prices.

On the other hand, some companies such as the US Big Three General Motors (GM), Germany's Volkswagen, and Volvo are maintaining their existing prices. After announcing its earnings in February, GM indicated in a conference call that it would not join the price cuts, stating, "The product competitiveness and pricing of electric vehicles are already in a good position."

Volkswagen CEO Oliver Blume also emphasized in a media interview that "we have a clear pricing strategy and will focus on reliability," reaffirming the company's commitment to its existing policy.

This price reduction announcement came just before the first-quarter earnings release. Investors expect that the significant price cuts will have a considerable impact on Tesla's profits. A Bloomberg Intelligence analyst stated, "Tesla's price reduction strategy will put pressure on its annual profit margin this year." Tesla is scheduled to announce its first-quarter earnings on the 19th.

This content was produced with the assistance of AI translation services.