Tesla’s Model Y, the electric car maker’s best seller, and versions of its other cars and crossovers are getting more expensive following CEO Elon Musk’s warning of a ‘tough quarter’, a period that includes a drop in production in China due to strict Covid rules, job cuts and a sharp drop in the value of its shares.
The base Model Y jumped $3,000, or 4.8% this week, to $65,990 from $62,990. Add a color other than Pearl White or Silver Metallic, Tesla’s controversial “Full Self-Driving” option and taxes and customers will spend over $80,000. While the lowest-priced Model 3 sedan remained unchanged at $46,990, the Long Range version of the car rose $2,500 to $57,990. The Model X SUV jumped $6,000 to $120,990 and the Model S sedan is now $104,990, up $5,000 from $99,000.
Tesla regularly changes the price of its vehicles, rarely explaining why. In this case, raw material costs for batteries, aluminum, steel, as well as semiconductor supplies, have created headaches for all automakers. The brand’s strong appeal to high-income consumers suggests the price increases are unlikely to put off too many buyers.
“The brand appeals to a well-heeled audience, as evidenced by the fact that the Model Y, which had a base MSRP of just under $63,000 until this week, has sold nearly 200,000 units. last year,” said Ed Kim, president of industry researcher AutoPacific. “It’s remarkable because no other similarly priced SUV comes close to selling distance at these volumes. So far, Tesla has had no trouble continuing to dominate the electric vehicle space and finding a large number of customers willing to spend a lot of money on their products.
The price changes come as the Austin, Texas-based company ends a rocky second quarter in which Musk simultaneously decided to acquire Twitter, became openly politically partisan and announced plans to cut about 10% of jobs. employees at Tesla and to demand that staff stop working. from a distance. The company also lost significantly more production at its Shanghai factory than Musk had expected two months ago and saw auto sales in China temporarily slump.
Draconian public health rules intended to stop the spread of the coronavirus that began in late March continued to temporarily idle Tesla’s factory in early April and kept production well below capacity through May. Production could return to roughly normal this month, although the plant is likely to produce only 115,300 units in the quarter, compared to 178,887 in the first three months of the year, according to Reuters, citing data from the China Passenger Car Association. It’s unclear whether the slowdown in China will lead to a significant drop in revenue from the first quarter of the year, as the company also ramps up production at new factories in Berlin and Austin. If so, however, it would be Tesla’s first sequential decline since the third quarter of 2019.
“Given Tesla’s extraordinarily high reliance on Chinese production (>40% of global production) and profitability (we estimate well over 50% of Tesla’s profits come from China), the disruption of local Covid lockdowns is understandable, if not entirely within the consensus forecast. right now,” Morgan Stanley analyst Adam Jonas said in a research note this week. “But as Tesla has shown throughout its history, it can make up substantial lost ground with accelerated deliveries at the end of a quarter where disproportionate amounts of a full quarter’s production can occur during What’s more, what might be lost in Q2 could simply provide pent-up sequential tailwinds for Q3 results.
Separately, Tesla also stood out in new data released by the National Highway Traffic Safety Administration this week, showing the company’s vehicles with Autopilot accounted for 70% of 392 crashes in the past 11 months involving cars. and trucks equipped with partially automated driving functions.
Recession fears, recently stoked by Musk in leaked memos, also hit the company this quarter, contributing to a 40% decline in its stock value since March 31. Tesla rose 1.7% to close at $650.28 on Nasdaq on Friday.
Currently, the average electric vehicle sells for $64,388 in the United States, compared to an average transaction price of $47,148 for all new cars and trucks, according to Kelley Blue Book. This higher price for electric vehicles already reflects Tesla’s dominance in this market, says Michelle Krebs, executive analyst for Cox Automotive.
“The biggest roadblock to EV adoption is the price of the vehicle, according to our surveys,” Krebs says. “However, I’m not sure if that applies to Tesla buyers. They’re a unique bunch. They don’t usually shop. They just want a Tesla.
Tesla’s price increases, particularly for the Model Y, could lead some potential buyers to consider electric rivals including Ford’s Mach-E crossover, starting at $43,895, Hyundai Motor’s Ioniq 5, at starting at $39,990 and Kia’s EV6 with a base price of $40,900. All three models are also eligible for a $7,500 federal tax credit that Tesla buyers no longer get because the company has long since exceeded the maximum eligible vehicles. Additionally, California customers can receive a $2,000 rebate for versions of these models priced below $45,000, a benefit Tesla customers also don’t receive, because the company doesn’t have currently have a product that meets this requirement.
Given Tesla’s competitors’ weaker production capacity and electric vehicle sales, its higher prices shouldn’t impact U.S. business in the near term, though the company will eventually have to address that issue, says Jessica Caldwell, executive analyst at Edmunds.
“Tesla’s market share in the electric vehicle space will only shrink over time as this market swells with new products from various brands, so it would be beneficial for Musk’s team to start addressing at the lower end of the market to position Tesla as a brand. It’s both achievable and ambitious,” she said. “It will be important when electric vehicles become more mainstream.”
Tesla’s price hikes this week were first reported by Electreka site for electric vehicle enthusiasts.
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