You’re Not Gonna Believe This But Tesla Slashed Its Prices Again

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A fine Wednesday morning to you all, dear Autopians. What wondrous adventures await us in today’s morning news roundup, you ask? Well! We have Tesla’s Q1 earnings call tonight, and that brings somehow more price cuts to key parts of the lineup. At this rate we’re gonna have Elon Musk doing infomercials where he screams about the deals he’s slinging—but only for a limited time, of course.

On top of that, we have more EV pricing news out of China that could rock the rest of the industry; Congress is looking into Ford’s battery plant deal; and why rear-wheel-drive is making a comeback. Let’s dig in.

More Tesla Price Cuts (Yes, Again)

0x0 Modely 04
Photo: Tesla

You know the drill by now, and if you don’t, I’m about to fill you in anyway because that’s ostensibly what David Tracy pays me to do. Starting this year, Tesla’s facing stiff competition really for the first time ever—although plenty of legacy automakers are struggling to get those EVs out. The cars are still remarkably competitive and class-leading in many ways, but they’re getting old. So one way to compete is with scale and profit margins: Tesla can afford to slash prices in order to spur demand when other automakers are taking an absolute bath on selling EVs right now.

This move, coupled with the Inflation Reduction Act’s EV tax incentives (which have been very beneficial to Tesla) have made the Model 3 and Model Y into screaming deals all year. Now, for the sixth time in 2023, Tesla slashes prices again. Here’s Automotive News to explain:

In the U.S., the base Model Y starts at $48,630 with shipping as of late Tuesday, according to Tesla’s website. The base is a new trim added this month. The previous entry trim, the Model Y Long Range, now starts at $51,630 with shipping. Before this year’s price cuts that began in mid-January, the Model Y Long Range started at $67,190 with shipping.

The falling prices are more dramatic when the new federal tax incentive of $7,500 is added to the Model Y. Prior to Jan. 1, Tesla vehicles did not qualify for the previous tax credit because the EV maker exceeded a 200,000 vehicle quota in 2020. The new incentive has no quota but requires North American assembly and certain battery-sourcing requirements.

Tesla cut the U.S. price for the base Model 3 sedan on Tuesday by $3,000 to $41,630 with shipping. The base Model 3 qualifies for a tax break of $3,750 — half that of the Model Y — because it uses battery cells imported from China. The pricier Model 3 Performance trim qualifies at $7,500 because the batteries are sourced in the U.S.

At the same time, Tesla is expected to report auto gross margin of 23 percent Wednesday, according to a Visible Alpha survey of market analysts. A year earlier, Tesla reported a 33 percent gross margin, Reuters said.

In January, Tesla CFO Zachary Kirkhorn estimated that gross margin would not fall below 20 percent, which is still very healthy by industry standards. Tesla’s stock price this year is up by more than 70 percent as of Tuesday’s close.

I think this works to spur Tesla adoption for now, but eventually, the automaker is going to need to come up with some new models and new tricks to compete with the A-game so many other OEMs are bringing to the EV party. (I’m not sure this upcoming Model 3 facelift cuts it.) Then again, we’re almost to May of this year and it’s fair to say Tesla still has a comfortable lead in this race.

But China’s Really Cracked The Cheap EV Code

Byd Seagull Side Profile
Photo: BYD

Indeed, making EVs cheaper and more profitable is going to be the big race for automakers moving forward—arguably even more than things like range or charging times. All week, we’ve been covering how Auto Shanghai 2023 proves how far the homegrown Chinese automakers have come in this arena, to the point where they’re trouncing the Western and other Asian brands that once dominated the market there. We’ve come a long way since tweeter and sackbut.

It’s a big deal when this happens in China, the world’s biggest and most important car market. But the cheap Chinese EVs are about to kick some ass on the home turf of Volkswagen and BMW and the rest. Here’s Reuters on the situation, highlighting the ultra-cheap 186-mile BYD Seagull in particular:

“The Seagull is another manifestation of the aggressive deflationary pressures coming from (Chinese) automakers,” Morgan Stanley analyst Adam Jonas said in a note for investors, predicting a “more aggressive push” from Chinese companies to sell entry-level EVs outside China.

Musk’s Tesla (TSLA.O) cut prices in the U.S. for the sixth time since the start of the year on Tuesday, looking to drive demand in the face of economic uncertainty and growing competition. Tesla’s price cuts have prompted other automakers, including in China, to follow suit.

But the Shanghai show and the Seagull highlight a related dynamic: Chinese automakers are now leading the world in making EVs that compete on price and technology for the average budget.

And many more of those cars from BYD and its rivals will be headed to Europe, Southeast Asia and other overseas markets, threatening established automakers, executives and analysts said.

See, the Europeans are as unhappy about skyrocketing new car prices as we Americans are. Why wouldn’t they be? And in recent years, it seems like automakers have quietly upped their prices across the board or kept them high post-pandemic, in the hopes that people will just finance or lease them forever. Cheap Chinese EVs could throw a wrench into that, just as brands like Toyota and Hyundai entered their markets as value propositions and went up from there.

The ones to watch in Europe will be BYD, Nio and Geely’s Zeekr brand. I think the IRA and America’s own political tensions with China will put up some barriers for their entry into this country, but I don’t think that will last forever. How can it?

Example No. 7,446 Of How Tense Things Are Between America And China

F-150 Lightning at the Rouge Electric Vehicle Center
Photo: Ford

Politicians on both sides of the aisle here are somewhere between deeply wary and openly hostile toward China. Case in point: Ford’s new battery plant joint venture with China’s CATL is going to face some hurdles of its own. This is the $3.5 billion plant that went to Michigan after Virginia’s governor rejected it, fearing the immediate and inevitable spread of communism that would’ve resulted. You know how it is; one day you’re building batteries, the next day everyone is legally required to keep photos of Xi Jinping hanging in their homes.

Ford is hinging a lot of its future EV battery hopes on this plant, swearing it’ll maintain 100% control and that CATL is just a technical partner. But at least one member of Congress isn’t happy. From The Detroit News:

The chair of the powerful House Ways and Means Committee wrote a letter Monday to Ford Motor Co. arguing the company’s planned battery plan in Marshall, Michigan, may go against the intent of the Inflation Reduction Act.

That arrangement has come under fire from Republicans in Congress, who have argued the project may pose a national security risk and would unjustly benefit from taxpayer subsidies through the IRA. Ford, whose global headquarters are in Dearborn, has said the company will wholly own and control the battery facility.

“I am alarmed about how Ford has structured this project in the context of the IRA’s clean vehicle credits and am concerned that other automakers may seek to use loopholes in the IRA to avoid guardrails meant to protect American enterprise and workers,” Rep. Jason Smith, R-Missouri, wrote in a letter to Ford CEO Jim Farley.

The letter also included a series of questions about Ford’s relationship with CATL and its intention to claim tax credits related to electric vehicle production or sales.

A Ford public policy spokesperson pushed back on Smith, saying again that Ford is just licensing the tech from CATL and keeping the company on as a technical advisor. But depending on how far Congress decides to go with this, it could put Ford’s IRA tax incentives at risk.

I tend to think that if America wants to build up a battery infrastructure and expertise that can compete with China, it may have to make moves like Ford is doing. But expect more political heat around all of this soon.

RWD Is Back, Baby

Photo: VW

One major, unexpected benefit of the EV revolution is that RWD is making a comeback. We love to see it, don’t we, folks?

The passenger car market went heavily front-wheel drive starting in the 1970s and ’80s with the numerous packaging advantages that layout provided, and it was better for traction in places with lots of rain and cold weather. But since then, traction control and stability control systems have gotten vastly better. And now, EVs don’t require as much packaging space for motors, and they go dual-motor when they want to go all-wheel-drive, which is another massively popular option across every price point. So why not go RWD on the base models?

This is a week old from Automotive News, but I missed it and I want to highlight it here. This development means lots of brands that abandoned, or never really had, RWD cars like Volkswagen, Hyundai, Volvo/Polestar and more are getting in on the tail-happy party. And drivers are better for it:

The revisions reduce the midsize fastback’s 0 to 100 kph (62 mph) acceleration time by 1.2 seconds to 6.2 seconds, Polestar said, adding that wasn’t the only advantage.

“When we reduce the weight on the front axle, we make the car a little bit more agile and a little bit more fun to drive,” Polestar head of chassis development Joakim Rydholm told Automotive News Europe. “So, we improve traction, we improve directness, speed of response, and that together gives more driving pleasure. This means we can improve comfort without sacrificing on performance and the handling.”

Volvo stopped making RWD cars in 1998 because it believed front-drive models were safer to operate because they typically perform better on snow and ice, even if it meant forgoing some of the handling and maneuverability advantages offered by rear-drive models.

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62 thoughts on “You’re Not Gonna Believe This But Tesla Slashed Its Prices Again

  1. If a republican is pissed about it, it’s probably fine. That asshat in Missouri is probably just upset he’s not getting a kickback.

  2. “The Chinese” are already here (in the US) at least in the case of Geely since Volvo and Polestar are here…
    I certainly expect some legislative blockers or trade limitations to the US market for Chinese brands will increase.

    Ironic goven the Chinese economy has been hugely built up in the past 40ish years from the demand side due to intentional US & UK policy shift to transition both economies to more lucerative ‘service based’ economy & intentionally offshore lower profit manufacturing jobs.
    I’m sure this had nothing to do with Margaret & Ron’s administrations politics, given the larger liberal/democratic/Labor party alignment in the early 80’s with unions

  3. I expect a lot of Tesla style price changes from OEMs that do direct sales. Sales lower than the current line rate? Drop prices, stoke demand! Sales higher than the current line rate? Increase prices, reduce demand and use the extra profit to increase supply (or buy Twitter).

    Traditional OEMs adjust supply/demand discrepancies by throwing cash on the hood and/or through financing deals. The end result for the customer is the same. The difference is seeing those price changes at the MSRP level or the bottom line at the dealership.

    In manufacturing, having a steady, predicable line rate is preferred. Overtime and downtime are disruptive to the staff and supply chains. Sometimes it’s better to break even or take a loss on a vehicle than to disrupt a smoothly running machine.

  4. We should absolutely be concerned about China getting its claws into this country, but I have yet to hear a coherent argument as to why this particular instance is bad. If anything, this is Chinese IP coming to the US instead of the other direction as has been the case in basically every other US-China business arrangement. It’s political grandstanding, nothing more.

    Everyone has been saying that eventually one of the car manufacturers would blink and stop marking up cars due to increasingly phantom “supply chain issues”. It would be interesting (and bad, see above concerns) if the car manufacturer were actually Chinese. If I were a current manufacturer of cars in the US enjoying the fat profits I’m sitting on right now, I’d be watching this very carefully.

    1. Yeah, and the factory’s here, if we were to go to war with China someday, its not like they’d pack it all up in suitcases and move out, we’d just take it over and keep running it for our own purposes (like we did with Merck’s US subsidiary in World War I, or like what the Germans did to Opel in WWII).

  5. In the Ford / CATL hookup, the Chinese are bringing material and expertise to our country for manufacturing by our citizens. How this is dangerous?

    1. Agreed. Furthermore, I think in this scenario Ford will be much more like the Chinese companies we partner with over there and deride for mooching our IP.

    2. CATL is a company that has direct connections and is partially owned by the CCP. If CATL brings their operations over to America, you are quite literally allowing the CCP to establish a another base in America.

      1. CATL is not bringing their operations to the US. Ford is building a plant where Ford will manufacture batteries using CATL’s designs. CATL will be in an advisory role only. They will not be running any US operations. The only way China can compromise anything is if they compromise Ford itself, and if that happens it will be because of Ford’s operations in China, not what they’re doing in the US.

        As I said elsewhere, there are plenty of reasons to be worried about China coming into the US, but this is not one of them and it’s distracting from all of the really shady stuff you can bet they’re doing much more quietly.

    3. They bring some expertise to our country, they establish operations, employ local talent and engage local contractors, then they take what the IP they can from those employees and contractors back to China. That’s how they stay ahead of the curve.

      I’m fine with CATL as long as the US is stealing their IP while they are here. Then it’s probably a good idea.

  6. I guess you have to justify an $800,000,000,000 military budget – why not go after our largest trading partner. Makes sense… Kevin McCarthy talking to Taiwan’s president is important an foreign policy initiative…. FFS

    BYD has a factory in California that makes electric buses and other such commercial vehicles. Geely is in the US via Volvo/Polestar. The world hasn’t collapsed, nor is there a Chinese agent in the trunk.

    The idea that the Chinese can only make tech based on thievery, is a sad concept. They make the best and most advanced EVs in the world, alongside Tesla. Ford, GM and Vw have’t figured out either how to make a cutting edge car, or how to make a profit. Get to work.

    Trump ceded the world stage to China, but the US is still a big player. If the US wants to compete on the world stage, they should make products that compete on the world stage. Tesla is one, and we are also the world’s largest arms dealer. Maybe we could look into other avenues.

    Also, we might adopt a foreign policy where everyone is not a deadly foe. China just negotiate a peace between the Saudis and Iran. How many lives will this save? All we do is fight dirty proxy wars and profit from arms sales. It all has to stop. We all live on earth – figure it out – use your words.

    1. I guess I do not see where anything you say indicates we need the Chinese company as a partner, I also see China supporting the genocidal illegal war that Putin has started, while also continuing to threaten a free, and sovereign nation that XI and his cronies seem to think is his. I think maybe when they stop becoming human rights abusers and supporters of war, I might stop considering them the foe as you put it.

    2. Is this like carbon offsets? Do they get to apply the lives they save between the Saudis and Iran and apply them to the lives they take from the Uyghurs?

  7. I’m more worried about US companies sending blueprints for things like, say MD80s and Cherokees to China and letting them have at it. If China wants to send us their technology to build in this country, I’m not as concerned.

    1. This is a legitimate issue they are having to contend with. But, apparently they are more worried about losing sales to others (and market share) then the possibility of their consumers sitting on the sideline a little longer.

  8. Concerns over Chinese tech are absolutely justified. Some of the rhetoric might be a bit blustery, but the author’s characterization of Governor Youngkin’s concerns is reductive and unfair. Every Chinese company is a de-facto arm of the state. People forgot that until they saw what happened to Jack Ma when he got uppity.

    The fact is we’ve been trying for 30 years to bring China into the world order in the hopes they’d abandon authoritarianism and it has simply failed. China never reciprocated and cleaned out the West for years to get a leg up. Given how important battery tech is and will be, it is imperative we develop it locally with no dependence on China.

    1. Concerns over Chinese software may be justified, but concerns over battery tech doesn’t seem to reach that same level. I suspect that there’s more sabre rattling for the press and not-so-smart voters than it is for any genuine concerns over national security.

    1. I’d totally drive a Vulture, especially if it has swoopy looks and good aero to help it soar down the highway with minimal effort. I’ll take mine in black.

  9. Tesla’s magic trick is the charging network. Its simple. Plug in and its charging in under 5 seconds. That’s not happening with CCS even with plug and charge. CCS can easily take 5 minutes to start charging, its abysmal still. Teslas are so easy to live with day to day. They have superior route planning for trips that take you to reliable chargers for road trips. That’s why they keep selling. People do not care about stale looks, see the Dodge Charger as an example. Everyone wants a crossover, Tesla sells one and it sells a ton of them.

    We need to do to China what they did to us. Partner with them and then just magically come up with a way to make the same product and cut them out.

    RWD is back and makes sense for EVs. That new VW ID.7 with the lift back design is an excellent looking vehicle. I can’t wait to see it in person and what it will cost. Its a pretty compelling car and VW seems to have learned from their early BEVs.

  10. Much of the USA’s “safety” regulations aren’t really about safety. They’re about promoting oversized high-margined vehicles and keeping inexpensive competition out of the country. There is no shortage of subcompacts in Europe where the car can crash at 100+ mph on the Autobahn, and the occupants can walk away, often without injury, that will not pass the USA’s “safety” regulations. The Chinese know a quality/reliable $15,000-20,000 EV with 200 mile range is possible, will eventually figure out how to do it, and that scares the legacy manufacturers in the USA. It’s only a matter of time that something that should have/could have happened 20 years ago, will eventually happen, and when it does, it will be a paradigm shift in the affordability of EVs and will represent a massive threat to the ubiquitous status symbol vehicles that currently saturate the automobile market. Couple that with declining financial resources among the American population, and unsustainable debt burdens. Events are lining up that could result in massive unsold inventory among legacy automakers.

    I think Tesla is well aware of this also. Due to limited parts/materials availability, they’ve been focusing on higher-margined models, and the price cuts performed show there was a lot of fat to trim. Eventually, they too will have to put out more affordable models. Expect to see something new and inexpensive from them in the near future.

    1. There is no shortage of subcompacts in Europe where the car can crash at 100+ mph on the Autobahn, and the occupants can walk away, often without injury, that will not pass the USA’s “safety” regulations.

      Do you have links to support this? I’d like to see them myself.

      1. European cars are built with more strict frontal and side impact tests, as well as whiplash prevention, which American cars don’t have. One of the U.S. standards that screws over smaller European cars is that U.S. regulations have strict rollover protection that is appropriate for heavy trucks and SUVs, that many of these tiny/light European subcompacts will not pass.

        Cars like the Audi A1, BMW 1-series and VW Polo are much safer in high speed crashes than the vast majority of U.S. cars, but because of the rollover protection requirements of the U.S. being geared toward trucks and SUVs, they fail.

        I don’t have links to the papers I read on the subject as that was done in a university library, but here is a link with some explanations:

        https://motorandwheels.com/european-cars-are-safer-than-u-s-cars/

        Here’s an article describing a BMW 130i crashing into the back of a trailer on the Autobahn at 180 km/h. The driver of the BMW had minor injuries, the passenger of the BMW had no injuries. This same car wouldn’t pass U.S. “safety” standards at the time:

        https://www.1addicts.com/forums/showthread.php?t=568114

        http://www.innsalzach24.de/innsalzach/region-muehldorf/a94-pkw-geraet-unter-lkw-innsalzach24-1347120.html

        You can go to wreckedexotics.com and see for yourself the results of various car crashes and the internet abounds with articles on Autobahn crashes. Some surprisingly harrowing speeds were involved in many crashes where the occupants survived or were even uninjured. It does help that lighter cars have less kinetic energy to dissipate than heavier cars.

    2. I think I read once that crash tests conducted by the NHTSA don’t include seat belts while crash tests conducted by the NHTSA-equivalent in the EU (or EU countries) do include seat belts. Therefore US-market cars need to be bulkier than EU-market cars. If this is complete BS, please call me out on this. I tried confirming if this was true by Googling for five whole minutes and didn’t come up with anything.

      1. I feel like I remember reading this many years ago as well, whether it was comparing the differences between NHTSA and IIHS (in addition to the overlap aspect of the latter) or just tying into restraint systems – given that in the 1980s there was so much focus on passive restraint systems that didn’t require action from the front passengers. Might have been in an editorial column in one of the mags. NHTSA’s site says they are belted now, but I don’t know if/when it changed.

        I don’t know if that’s true on the bulk thing for US-market cars, but the U.S. required airbags much sooner than other markets so some safety standards did evolve at different paces. It is interesting to compare IIHS safety ratings in the 90s though – brands like MB or Volvo did well, but VW’s models did not initially. The “world car” Ford Contour didn’t either, while the older U.S.-designed Taurus was a strong performer even the Explorer did well for its time. (That’s not a generalization though – most GM or Chrysler products did poorly too.)

  11. Big problem that will arise over cars from China is going to be the OTA updates. People are going to freak out about data going to the chinese again.

    1. Where does the data go for Polestar & Volvos ( if Volvo has Ota though I don’t think they do yet for any IS market cars) b/c both brands are owned by a Chinese company (Geely)?

      1. That’s a great question and one anyone should ask in a connected vehicle. Personally I don’t like any OTA updates and this don’t own a vehicle capable of it.

  12. The China concerns, while founded in reality, can certainly be overblown. Specifically privacy concerns. For every Chinese company funneling your personal data to the Chinese government, there are several US companies selling your data to the highest bidder. The Chinese government is a concern on, say, government phones, which really ought to avoid most apps anyway, especially any social media apps. But the panic about China having individual American data…they probably already have most of what they want. As a big producer of consumer goods and components, they’re already likely getting aggregated data on spending habits and such, which is exactly what they want.

    China isn’t looking to control us via TikTok. They are looking to control us via economic domination. The concerns around China should be around them exporting enough cheap goods to push out competition and then controlling entire markets. On that front, we need to be judicious about tariffs, incentives for non-Chinese products, and working well with trade partners.

    As far as I’m concerned, tax credits for EVs should be extended to all countries with which we have free trade agreements, and we should try to work out a favorable trade agreement with the EU to avoid China coming in and taking over most of that market. That would make economic dominance harder for China, help American consumers, and promote American products in other markets.

  13. Say what you will about Elon Musk (and people sure like to compete to see who can hate him most) but he seems to be doing more than anyone else to fight inflation.

    As for China, we wouldn’t have allowed a Soviet joint venture to get tax credits 50 years ago. Why on earth should it be any different now? We may not see the current situation as a Cold War, but China definitely does. We would be wise to make our policies accordingly.

  14. If China is willing to sell cheap EVs over here and use them as a loss leader like other companies used to do with their small cars, they may find a market. And they’ll have to be, like, stupid cheap. Ridiculous cheap. I’m talking “I can’t pass this up and I’ll take two” kind of cheap.

    1. Given his timeline on discovering older memes and content, he’s probably not far out from finally discovering Big Bill Hell’s – could provide some inspiration.

  15. The $21,000 in your graphic is _almost_ low enough to make me willing to get into a new Model 3. But only if you can prove to me that Musk is _losing_ money on that.

    At $40K? There are lots of other choices from companies not run by egomaniacal fruitloops.

      1. The important thing is that we don’t know they’re fruitloops. If Musk could only shut up for a while, he could go ahead and be crazy, and it wouldn’t really affect people’s perceptions of his companies. But I doubt his wild insecurity would allow for that.

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