Tesla Cuts Vehicle Prices In Bid To Boost Flagging Demand

With its sales slowing and its stock price tumbling, Tesla Inc. slashed prices dramatically Friday on several versions of its electric vehicles, making some of its models eligible for a new federal tax credit that could help spur buyer interest.

The company dropped prices nearly 20% in the United States on some versions of the Model Y SUV, its top seller. That cut will make more versions of the Model Y eligible for a $7,500 electric-vehicle tax credit that will be available through March. It also reduced the base price of the Model 3, its least expensive model, by about 6%.

Far from pleasing investors, the sharp price cuts sent Tesla shares down nearly 4% in midday trading Friday. Since the start of the year, the stock has plummeted more than 65%. Many investors fear that Tesla's sales slowdown will persist and have grown concerned about the erratic behavior of CEO Elon Musk and the distractions caused by his $44 billion purchase of Twitter.

"I think the real driver for all of this is falling demand for Teslas," said Guidehouse Research e-Mobility analyst Sam Abuelsamid.

Itay Michaeli, an industry analyst at Citi, wrote in a note to investors that Tesla appears to be prioritizing sales volume over price — a strategy that could affect its profit margins, at least in the near term.

Messages were left Friday seeking a comment from Tesla.

The Model Y Performance version, formerly priced at nearly $70,000, now starts at just under $57,000. The starting price of the Model 3, Tesla's lowest-priced vehicle, was cut to just under $44,000 from $47,000.

The company's decision to drop the base price of the Model 3, which had already been eligible for the federal tax credit, is a clear sign that demand had weakened, Abuelsamid noted.

Tesla has added two huge factories in Austin, Texas, and Berlin that are running at only a fraction of their output capacities, "which is undoubtedly costing them dearly," Abuelsamid said.