Tesla announced price cuts on its car models to boost sales at a time when its competitors increased the prices of vehicles. However, the customers who purchased Tesla cars before the price reduction are angry because they paid several thousand dollars to get delivery of their vehicles.
Price reductions drive the demand
In today’s latest news, Elon Musk, Tesla’s CEO, said the price reductions helped the company boost demand for its vehicles. According to information available from Tesla executives, the price reduction is aimed at making Tesla vehicles more affordable for car buyers. Some of its models also qualify for tax credits under the federal electric vehicle program.
A YouTube channel that focuses on Tesla organized a suit to provide discounted or free software updates for customers, who took delivery of Tesla vehicles before the price cut. The operator garnered over 6,000 signatures in support of this demand from previous customers. However, Tesla has not commented on this request from the customers.
Tesla slashed the prices of some of its car models by as much as 20% in mid-January. However, the anger of customers is not a common scenario in the auto industry when automakers reduce the prices of some of their models to improve sales. J.D. Power’s VP (Data and Analytics), Tyson Jominy, said he has not witnessed such deep and sudden discounts across multiple models in his life.
Shares gain on record profits in Q4
Shares of Tesla made significant gains last week and are continuing the same upbeat momentum after posting record profits in Q4 and improved guidance on upbeat demand. In an earnings call on Wednesday, Musk said the price of the cars matters. A lot of people intend to own a Tesla car but cannot afford it. He said the company hiked the price of its Y-model by $500 after cutting its price in mid-January amid strong demand.
Lost trust in Tesla
The healthcare executive, Vikas Kanna took delivery of a Tesla Model Y SUV by paying $65,000 in December 2022. It included a discount of $7,500. He could have saved an additional $5,000 considering the upgrades and accounting fee if the price discount was offered in December 2022 instead of mid-January. This reminds me why I should trust an organization like Tesla. He had already purchased two Tesla cars before making this purchase. He said his trust in Tesla is now lost.
Faces questions from Wall Street Analysts
Following the consumer backlash, Tesla and Musk are being questioned about the demand for their vehicles by Wall Street analysts and investors. Whether Musk’s takeover of Twitter was influenced by recent price cuts to increase demand. After listing around 65% of its shares in 2022, Tesla stock has rebounded by 35% so far in 2023 on the backdrop of bullish demand for Tesla vehicles and increased factory output.
The affected customers in China took to social media to express their dissent after Tesla offered a price discount in January 2023. In today’s Live breaking news, over 100 owners of Tesla cars gathered in Changsha in front of a showroom to show their anger after the EV maker announced price cuts in China. They have sent a letter of request to Tesla requesting compensation in the form of loyalty points or free charging.
Tesla introduced price cuts at a time when its rivals were introducing their EV models in the US, putting pressure on the profit margins of competitors. Compared to auto manufacturers that sell their EVs through dealers, Tesla has an advantage in adjusting the price of its models because it sells directly to customers.
