DETROIT (AP) — As sales fall and the stock price falls, Tesla Inc . cut the prices of several versions of its electric vehicles on Friday, making some of its models eligible for a new federal tax credit that could boost buyer interest.
The company has slashed prices by nearly 20 percent in the United States on some versions of its best-selling Model Y SUV. This reduction will make more versions of the Model Y eligible for a $7,500 electric vehicle tax credit, which will be available by March. It also cut the base price of the Model 3, its least expensive model, by about 6 percent.
Far from pleasing investors, the steep price cuts sent Tesla shares down nearly 4% in midday trading on Friday. Since the beginning of the year, the stock is down more than 65%. Many investors fear Tesla’s sales slowdown will persist and have worried about CEO Elon Musk’s erratic behavior and distractions from his $44 billion takeover of Twitter.
“I think the real driver of all of this is lower demand for Tesla,” 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 hurt profit margins, at least in the short term.
Messages were left for comment from Tesla on Friday.
The Model Y Performance version, previously priced at nearly $70,000, now starts at just under $57,000. The starting price of the Model 3, Tesla’s cheapest vehicle, has been cut to just under $44,000 from $47,000.
The company’s decision to lower the base price of the Model 3, which was already eligible for a federal tax credit, is a clear sign that demand has waned, Abuelsamid noted.
Tesla added two massive factories in Austin, Texas, and Berlin, which are operating at just a fraction of their production capacity, “which is undoubtedly costing them dearly,” Abuelsamid said.
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