Tesla Prices Compete with Average US Vehicle Costs Following Billions in Savings
According to an investor, Tesla Inc. could potentially lose $1.2 billion annually due to recent price reductions, as their popular electric vehicles are now directly competing with gasoline cars in terms of pricing.
At $38,990, the base Model 3 sedan now costs $8,700 less than the average price paid for a car or truck in the United States. According to Bloomberg Green’s analysis, the starting price of the Model Y SUV is $3,700 below the average car price of about $48,000. Tesla started cutting prices at the beginning of the year, turning the screw on legacy automakers that were already struggling to produce electric vehicles profitably.
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“Now the fun part of the cost is coming down … life after price parity,” said Sam Korus, an analyst at Ark Investment Management, which manages funds with about $1.27 billion in Tesla stock. “There’s no reason why battery costs or electric cars should stop price declines at price parity. The product can continue to cost less, or it can still stay in the same price segment and improve performance.
While last week’s cuts did little to change Tesla’s share price, this year’s drumbeat of discounts has driven a wedge between some investors. Gary Black, CEO of The Future Fund, said last week’s changes alone will cost Tesla $1.2 billion a year starting in 2024.
Black has used his widely followed X social media account to defend Tesla spending money on traditional advertising campaigns instead of price cuts. “It amazes me that the Tesla uber-bulls are [trying] to turn last night’s price cuts into a positive,” Black wrote on Oct. 6. “We hope Tesla will use long-term advertising investment to educate [combustion engine] owners to go. Electric cars instead of price cuts.”
The Model 3 now starts at $6,500 less than the cheapest BMW 3 Series, often considered the Tesla sedan’s most direct gasoline-powered competitor. When you add in a $7,500 federal EV incentive and fuel savings, the cost of ownership is on par with a 2024 Toyota Corolla.
Tesla has also lowered the price of its most expensive vehicles, the Model S full-size sedan and the Model X three-row SUV, both of which are the cheapest ever compared to the average US sale price. According to automotive information company Edmunds, the benchmark price of a new vehicle in the US was $47,698 in September.
Some see Tesla’s price cuts as the cost of fueling demand after CEO Elon Musk’s acquisition of Twitter Inc. — now X Corp. — and his growing commitment to right-wing politics.
“Unfortunately, Tesla still has to cut prices to sell cars,” said Ross Gerber, founder and CEO of asset management firm Gerber Kawasaki Inc. “Call off the core demo and kill the margins to destock. The master plan!”
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