Tesla’s bargain bonanza

Everything must go: Prices on some Teslas are down ~20% since January.

What happened: The carmaker cut prices for its high-end cars in its fifth price adjustment of the year, in an effort to drive demand. Last week, Musk told investors: “We found that even small changes in the price have a big effect on demand, very big.”

  • Since Tesla sells its own cars directly to consumers (rather than through third-party dealerships) it can use a “dynamic pricing” model to change price tags on a whim.

  • The price cuts could be offset down the road if Tesla succeeds in its plan to cut production costs in half with a new plant in Mexico.

Why it matters: “Increased competition, government incentives and falling prices for lithium and other battery materials are making electric vehicles noticeably more affordable,” per The New York Times. Tesla’s maneuvers are pushing other carmakers to budge on price, too. 

  • Ford cut prices on its EVs in response to changes in the marketplace, referring not only to Tesla but federal tax credits that apply to EVs within a certain price range.

Yes, but: Don’t hold your breath for a wider EV price war. BMW, Mercedes-Benz, Hyundai, Volkswagen, Volvo, and Renault have all said they’re not going to be adjusting prices.

Zoom out: The price cuts are happening in the face of rising demand—in Canada, electric cars are thought to have jumped from 2.9% of registered vehicles in 2019 to 8% last year. Lower prices could shift the market into a new gear in 2023.