Tesla Offers Rare Year End Discounts on 2 Top Selling Models

Last Updated: December 23, 2022

Through the end of the year, Tesla Inc. is giving uncommon discounts on its two best-selling models, a sign that interest in its electric cars is waning.

Earlier this month, the Austin, Texas-based company began promoting a $3,750 incentive on its Model 3 sedan and Model Y SUV on its website. On Wednesday, they increased the discount to $7,500 for customers who take delivery between now and December 31.

The action is being taken in advance of a new federal tax credit of up to $7,500 that is planned to go into effect on January 1. A prior federal tax credit programme did not apply to Teslas because the business had sold 200,000 of its allowed 200,000 vehicles. There is no cap on the credits for the following year.

Wedbush analyst Dan Ives wrote in an email, "This is an indication of demand fractures and not a favourable indicator for Tesla heading into the December year-end." There is more EV competition overall, and Tesla is experiencing some demand challenges.

In January, lower-cost Models 3 and Y models will be qualified for the federal tax credit due to the Inflation Reduction Act's restrictions on vehicle purchase prices.

The starting price for the Model 3 without discounts is little over $48,000, including shipping, while the starting price for the Y is just over $67,000. The sticker price of a car cannot exceed $55,000 for sedans and $80,000 for trucks and SUVs in order to qualify for the federal tax credit.

Due to a legal quirk, many North American-made automobiles, including Teslas, will likely be qualified for the full $7,500 tax credit from January through March since the Treasury Department is still developing regulations requiring that battery materials and parts originate in the United States. Once the regulations are released in March, it is likely that the majority of the vehicles will only qualify for half the credit.

In an effort to reach a commitment to increase vehicle sales by 50%, Tesla may be providing the discounts to encourage sales before the end of the year.

Tesla CFO Zachary Kirkhorn stated during the company's third-quarter results conference call in October that Tesla will come up slightly short of its 50% sales growth target. But Elon Musk, the CEO of Tesla, later refuted him.

Musk anticipated a 50% rise in production and deliveries per year, but he also cited shipping logistics challenges.

Tesla needs to perform exceptionally well in the fourth quarter in order to meet the 50% sales growth target.

The company shipped 908,573 automobiles through September, down from just over 936,000 vehicles in the same period last year. The corporation would need to sell more than 490,000 automobiles in the fourth quarter in order to surpass last year's sales by 50%, or almost 1.4 million vehicles.

FactSet, a data source, surveyed industry analysts who predicted that Tesla will deliver 431,000 vehicles in the fourth quarter, bringing its annual total to 1,341 million.

Since Musk revealed in April that he had acquired a sizable interest in Twitter, Tesla shares had lost more than 60% of their value. They dropped 6.6% in early trade on Thursday, hitting a new two-year low of $127.70. Investors are concerned about demand and the fact that the CEO has been diverted from the car firm since Musk eventually purchased the social media platform.

This week, Musk declared that he intends to continue leading Twitter until he can locate a suitable candidate to take his place.

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Tesla Offers Rare Year End Discounts on 2 Top Selling Models

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