Tesla offers rare year-end discounts on 2 top-selling models
DETROIT Tesla Inc. is offering two top-selling models at a year-end discount, indicating that electric vehicle demand is slowing.
The Austin, Texas, company started offering a $3,750 incentive on its Model 3 sedan and Model Y SUV on its website earlier this month, but on Wednesday doubled the discount to $7,500 for those who take delivery between now and Dec. 31.
The move comes ahead of a new federal tax credit of up to $7,500 that’s scheduled to take effect Jan. 1. Teslas weren’t eligible for a previous federal tax credit program because the company had reached a limit of 200,000 vehicles sold. Next year’s credits won’t have this limit.
“This indicates that demand is weakening and is not a good sign to Tesla going into the December year-end,” Wedbush analyst Dan Ives stated in an e mail. “EV competition is increasing across all sectors, and Tesla is facing some demand headwinds. “
The federal tax credit for Models 3 and Y is available in January. This is due to the Inflation Reduction Act’s limits on vehicle purchase prices.
Without the discounts, the Model 3 starts at just over $48,000 including shipping, while the Y has a starting price of just over $67,000. To be eligible for the federal tax credit, vehicles can’t have a sticker price of over $55,000 for sedans and $80,000 for trucks and SUVs.
In a regulatory quirk, many vehicles like Teslas that are made in North America likely will be eligible for the full $7,500 tax credit from January into March because the Treasury Department is still working on rules requiring battery minerals and parts to come from North America. Most of the vehicles won’t be eligible for the full credit when the rules are released in March.
Tesla may be offering the discounts to juice sales before the end of the year in an effort to meet a pledge to grow vehicle sales by 50%.
On the company’s third-quarter earnings conference call in October, Tesla CFO Zachary Kirkhorn said Tesla will fall just short of its 50% sales growth target. However, he was later contradicted by CEO Elon Musk
Musk predicted 50% annual production and delivery growth, but also pointed to logistical problems shipping vehicles.
To reach the 50% sales growth target, Tesla must have a stellar performance in the fourth quarter.
Through September the company delivered 908,573 vehicles, compared with just over 936,000 vehicles a year ago. To increase sales by 50% over last year, which would amount to about 1.4 million vehicles, the company would have to sell more than 490,000 vehicles in the fourth quarter.
Industry analysts polled by data provider FactSet expect Tesla to deliver 431,000 vehicles in the fourth quarter, ending the year at 1,341 million.
Tesla shares have lost more than 60% of their value since Musk announced in April that he had taken a large stake in Twitter. They fell nearly 9% in Thursday, closing at $125. 35 after U.S. safety regulators said they would probe two more Tesla crashes possibly involving automated driving systems.
Eventually Musk bought the social media site, and investors are worried about demand and that the CEO has been distracted from the car company.
Musk stated this week that he will remain as Twitter’s chief executive officer until he finds someone to take his place.
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