They do make ~ $1.5B a year selling carbon credits in the US at 100% margin rate. It’s only about 10% of their total profit but they could probably use that to offset some of the pricing impacts.
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More price drops coming?
- Thread starter vickh
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Watts_Up
Well-Known Member
My point was to find out if the new discounted (dumping) price will be permanent or only for Q1?
This price war looks like a poker game !!!
There's a glut of cars in my area that are available (around 50) that are just above the tax credit price. My guess is they will discount them at some point to meet the threshold and move inventory.
There are a lot of factors:
I think, because of all of those factors that have been discussed ad nauseam, that 2022 was probably a price bubble. After the recent price reductions we’re still ~ 2K higher than the prices of Q1 2021.
There are signs of impending disaster in the automotive sector
Tesla has been touting cost reductions for months now so maybe this is a result
The biggest unknown is tax credit; most people think it might change in march.
I believe the tax credit is based on MSRP; so, if you buy a demo for less than $55K that has an MSRP greater than $55K you might get burned.
SageBrush
REJECT Fascism
That is exactly what I did. My estimated delivery date is now Jan 22 - Feb 09, but I don't take those estimates seriously until I am in the delivery window.
ucmndd
Well-Known Member
I see it a little differently.
I’m not sure a discount is actually enough… MSRP determines eligibility.
I think these cars will sit around and slowly be picked off over the next quarter - plenty of people in the market ineligible for the tax credit. If they’re really not moving at all they might put them into service as loaners and demos.
But you can bet moving forward pretty much every new car they can make this quarter will be a sub-$55k config or 7 seater.
Sorry when I meant discount, I was thinking of it in the context of lowering MSRP further.
I'm also not sure there's that many people ineligible for the tax credit left for them to pick off. Outside of a few Tesla enthusiasts, I think they pretty much captured all the demand through December, hence the even steeper MSRP cuts vs. creating a tax credit specific product. From a luxury car buyers perspective, as many people on this forum have mentioned, this is meant to be a car for the people etc... if that's the case, a Mercedes or BMW buyer wouldn't be looking at buying this in the same way they wouldn't consider a RAV 4. It's sorta in that in between segment that infinite and Acura sits now.
This is what I meant by devaluing the brand - the car market is highly fragmented and segmented - a $55k car is perceived differently than a $65k car. Scarcity has value, etc...
EXOTIC1
Member
TESLA:
Putting all other OEM’s on notice that they can’t compete in EV segment. End of GM and F in that price point segment. Mess with the bull you get the horns.
Putting all other OEM’s on notice that they can’t compete in EV segment. End of GM and F in that price point segment. Mess with the bull you get the horns.
I wouldn't count on the Inflation Reduction Act legislation adjusting price limits upwards to account for inflation!
In the same vein if prices don't come down and stay down, especially for personal consumption stuff like cars, the US Fed will ratchet up interest rates to further decrease demand and rein in prices.
I could potentially see discounts/cuts on options towards the end of the quarter in cases where the options are bringing the MSRP above the $55k limit if there are sufficient numbers that haven't moved, but I think Tesla is likely focusing on production of the <$55k configs to limit that risk.
And then who knows what will happen after guidance comes in March (if it does), the credit will most likely be halved in many cases or removed entirely depending on the batteries.
Next year vehicles will be disqualified from the credit if they contain any battery components from China, Russia, North Korea, or Iran.
At the end of the day, the question remains: "How nimble is tesla at coping with change?" History has shown tesla to be very nimble and pragmatic. It's the OODA loop on hyper drive hahahah. This company is being run by a man that slept at his factory, I expect nothing less. Hahahhahaha
If any company can adapt it's Tesla, but I know there are currently real physical and structural limitations on stuff the IRA is trying to address in the battery component and critical mineral supply chain that China has a borderline monopoly on right now. Much of this part of the legislation is really about pulling that supply chain out of China, and it will likely be a pretty slow and expensive process particularly on the mineral side of things.
That's a good point... but the fact is Elon needs to move cars. He has the "highland" version of the model 3 and he could always give include fsd to "over come" the 7.5k tax credit (assuming Tesla will no longer qualify which is the worse case scenario).
What is surprising to me is that industry experts ares saying previously that Tesla makes a net profit of arround 10k per car (more than of any car manufacturer) , however, as we have seen, Tesla has lowered the price on average close to 10k, but yet Tesla is still making profit. Something doesn't add up. I think Teslas margin were actually higher than 10k.
I think there is room for more discounts especially after the cost cutting measures. I could be wrong. But this is the guy that builds rockets to the moon so if anyone can make teslas cheaper, I think Elon can.
Ostrichsak
Well-Known Member
One of Tesla's big focuses has always been their manufacturing process and how they have dramatically advanced this towards greatly reducing the cost of production. Elon (correctly) projected that they would need to be able to produce cars cheaper than anyone else and we're starting to see more of those advanced improvements to production pay off.
The current crowning achievement of this mission is Giga-Texas. These 2023 MY's are the first direct product of those efforts so it makes sense that they're producing them quicker and cheaper than Freemont was able to churn out. Those $10k figures were based on 2022 and previous vehicles so it stands to reason that, in a time where Elon feels they need a significant discount, they can tap into some of those newly discovered economies of scale to erase what would have previously been all of the profit.
Pure speculation at this point but it all makes sense. One thing that Tesla has done multiple times over the years is pass along savings they were able to generate onto the buyer through regular discounts. Annoyingly so in some cases is is the case for recent MY buyers after this drop in price. I think that he made a shrewd move to cut a few vehicles to razor thin margins because it made the best business sense for many reasons at this moment in time.
I don't think there was enough margin to see larger discounts going forward as a few are speculating. If you're at all in the market for a Model Y I'd pull the trigger right meow.
SageBrush
REJECT Fascism
Tesla and Elon have said that they price cars based on projections 6 months from now. For the past 1- 2 years that has meant supply chain costs and demand. I suspect that golng forward into 2023, it means Tesla growth and demand.
Model Y Performance has never been cheaper
Model Y Long Range was briefly $48,990 at the start of 2021 but had spent almost a year <$50k
Commodity, labour, and other inflation has of course shot up since then but Tesla is also producing far more vehicles now so they should be seeing big cost benefits from scale
thesmokingman
Active Member
They are not setting prices on a whim. It will depend on COGS reduction due to successful ramping of Austin and Berlin.
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