Tesla Inc is offering rare discounts through the end of the year on its two top-selling models, an indication that demand is slowing for its electric vehicles (EV).
The Austin, Texas, company earlier this month started offering a US$3,750 incentive on its Model 3 sedan and Model Y sport utility vehicle (SUV) on its Web site, but on Wednesday doubled the discount to US$7,500 for those who take delivery between now and Saturday next week.
The move comes ahead of a new federal tax credit of up to US$7,500 that is scheduled to take effect Sunday next week. Teslas were not eligible for a previous federal tax credit program, because the company had reached a limit of 200,000 vehicles sold. Next year’s credits do not have such a limit.
Photo: Reuters
“This is a sign of demand cracks and not a good sign for Tesla heading into the December year-end,” Wedbush analyst Dan Ives said in an e-mail. “EV competition is increasing across the board, and Tesla is seeing some demand headwinds.”
Lower-priced versions of the Models 3 and Y would be eligible for the federal tax credit next month due to limits on vehicle purchase prices outlined in the Inflation Reduction Act.
Without the discounts, the Model 3 starts at just more than US$48,000 including shipping, while the Y has a starting price of just more than US$67,000. To be eligible for the federal tax credit, vehicles cannot have a sticker price of more than US$55,000 for sedans and US$80,000 for trucks and SUVs.
In a regulatory quirk, many vehicles such as Teslas that are made in North America likely would be eligible for the full US$7,500 tax credit from next monto to March, because the US Department of the Treasury is still working on rules requiring battery minerals and parts to come from North America. It is likely that most of the vehicles would only be eligible for half the credit once the rules come out in March.
Tesla might be offering the discounts to juice sales before the end of the year in an effort to meet a pledge to grow vehicle sales by 50 percent.
On the company’s third-quarter earnings conference call in October, Tesla chief financial officer Zachary Kirkhorn said Tesla would fall just short of its 50 percent sales growth target. However, he later was contradicted by CEO Elon Musk.
Musk predicted 50 percent annual production and delivery growth, but acknowledged logistical problems shipping vehicles.
To reach the 50 percent sales growth target, Tesla must have a stellar performance in the fourth quarter.
Vehicle deliveries through September reached 908,573 units, compared with just more than 936,000 vehicles a year ago. To increase sales by 50 percent over last year, which would amount to about 1.4 million vehicles, the company would have to sell more than 490,000 vehicles in the fourth quarter.
Industry analysts polled by data provider FactSet expect Tesla to deliver 431,000 vehicles in the fourth quarter, ending the year at 1.341 million.
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