Tesla Cuts Prices Across Models Sold in U.S.

Elon Musk

‘s car company slashed the price of its baseline Model Y crossover by almost 20% to $52,990, not including certain fees. That enables buyers to qualify for the tax incentive by putting the vehicle below a $55,000 cap. Tesla’s 14% cut to the price of a high-performance version of its Model 3 sedan, which now costs $53,990, also puts that configuration within the price range needed for buyers to receive the tax benefit. 

The Model 3 and Model Y are Tesla’s bestselling vehicles and represent the bulk of the company’s output. The company also lowered prices for its Model S luxury sedans and Model X sport-utility vehicles.

Tesla shares were down more than 3% in early Friday trading. The stock fell around 65% last year, its worst annual performance. The stock selloff happened amid temporary shutdowns of Tesla’s China car plant, recession concerns and Mr. Musk’s focus on running Twitter Inc., which he bought last year. 

The company didn’t respond to a request for comment. 

The price cuts come a week after Tesla cut prices in China by as much as around 13% after deliveries of its Shanghai-made cars plunged in December. The company has also cut prices in Europe.

Tesla’s price adjustments will have a significant impact on the car maker’s profitability in the near term, Chris McNally, an auto analyst at Evercore ISI said in a note Friday. 

Tesla is facing more competition in the electric-vehicle market as both traditional car companies and newer entrants introduce new models and capture market share. 

Last month, Mr. Musk suggested that the higher-interest-rate environment was hurting vehicle demand. Tesla offered discounts to many buyers who agreed to take delivery of vehicles before January to goose sales in a year-end sales push. 

Tesla rivals have largely pulled back on discounts of any kind, due to supply constraints that have left dealerships with little to sell, particularly in the electric-vehicles segment where demand broadly has been outpacing limited inventory.

Dealers have been able to charge more than the manufacturer’s suggested retail price. The average price paid for an EV in the U.S. hit about $66,000 last summer, up from about $51,000 a year earlier, according to J.D. Power., known for its assessments of auto makers.

Tesla’s decision to cut sticker prices outright also represents an unusual strategy to generate demand in the U.S. market, where traditional auto makers generally resort to discounts and other types of sales promotions to bring in shoppers. Those strategies often involve the large network of dealerships other car makers rely on and Tesla lacks because of its direct-to-consumer sales model.

Despite offering incentives, Tesla missed its 2022 growth target. It delivered about 1.31 million vehicles last year, up roughly 40% from 2021. The company initially aimed to increase annual vehicle deliveries by 50% or more. 

Write to Rebecca Elliott at [email protected]