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Why Has Tesla Slashed Its Prices?
Is Tesla delivering on its promise, or is something else happening?
By now, you have probably heard the news that Tesla has massively slashed the prices of its cars in the US, UK, and Europe. These cuts aren’t minor either; the base Model Y is now $9,000 cheaper, and the Model S Plaid is now $21,000 cheaper! So the question has to be asked: Why has Tesla done this? Is it to finally make that long-promised $35,000 Tesla? Or is something else afoot?
Tesla claims these price cuts are due to “partial normalisation of cost inflation” and lowered manufacturing costs. “Partial normalisation of cost inflation” essentially means that supply chains have managed to sort themselves out after a tumultuous few years, making materials cheaper. According to Tesla, rather than using these savings to make more money per vehicle sale, they have chosen to pass them on to the consumer.
But right away, this doesn’t make sense, and even media outlets that generally praise Tesla think this is fishy. For one, Musk still gets a lot of his battery packs from China, which is still massively struggling with COVID, meaning Tesla’s supply chains aren’t normalised and are still being disturbed. Then there is the fact that material costs (such as lithium, steel, and computer chips) are still significantly more expensive…
