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The Associated Press
DETROIT -- 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, which will be available through March. Tesla 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 2% in late-afternoon trading Friday. Since the start of last 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.
Based on the current short delivery times for Tesla vehicles that once were months long, Tesla's once-sizable order backlog may have been depleted, said Scott Case, CEO of Recurrent, who analyzes the new and used EV markets.
Customers either were awaiting this year's federal tax credits, Case said, or switched to competitors.
"We think it's now more of a competition thing," he said.
Unlike many of its rivals, though, Tesla can still make money on EVs for one crucial reason, Case said: The company enjoys high profit margins, thanks to manufacturing and battery efficiencies.
Competitors generally lack Tesla's economies of scale and other efficiencies and may struggle to match the price cuts. If so, Tesla could manage to keep vehicle sales at sufficient levels.
"They can afford to make this cut and not be lighting money on fire," Case said.
Messages were left Friday seeking a comment from Tesla.
Tesla still faces the threat of intensifying competition from other automakers in the United States and globally for years to come. Last year in the United States, total EV sales soared nearly 65% from 2021. Automakers sold 47 electric vehicle models; only four were Teslas. S&P Global Mobility expects the number of EV models to surge to 159 by 2025.