Teslas are finally becoming more affordable. It's an indication that Elon Musk's back is against the wall.
Tesla lowering model prices by up to 20% is a sign that Elon Musk is in trouble.
As interest rates rise, the EV manufacturer wants to boost demand.
It also faces increased competition and declining demand.
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If you're in the market for a new Tesla, now might be the time to buy: Elon Musk has just made it a lot less expensive to join the electric vehicle club.
Some of its top models, including the Model Y SUV and Model 3, have been reduced by up to 20% in the United States and Europe, according to price changes made to vehicle listings on its website on Thursday.
Though the cars remain reasonably priced, there has been a significant reduction in premium pricing. And it's a sign that Tesla is preparing to defend itself.The
EV company has reduced prices on
Problems with interest rates
Musk has increasingly used Twitter since taking over to express his dissatisfaction with the Fed's aggressive interest rate hikes to bring inflation back down to its target of 2%.
The billionaire tweeted in November that the "Fed needs to cut interest rates immediately" because "they are massively maplifting the probability of a severe recession."
Tesla has suffered as interest rates have rises Investors have soured on its stock for the same reasons that other tech stocks have — speculative companies betting on the future are less appealing to investors right now than safe-haven value stocks like commodities.
This has prompted a rethinking of whether Tesla should be priced as a traditional car company or a tech company, with the latter traditionally benefiting from significant markups on the promise of game-changing innovation. Investors are becoming more aware of this as interest rates rise.
Interest rate hikes have also increased the costs of financing the purchase of a Tesla, making the switch more difficult for consumers already battered by inflation.
In response to a Twitter thread about consumers who took out loans before interest rate hikes took effect — and are now being penalized —face increased repayments — Musk tweeted that it could cause "the biggest financial crisis ever."
Demand is a more serious issue than the Fed.
Dan Ives, senior equity research analyst at Wedbush Securities, stated in a research note that "it's no secret that demand for Tesla is starting to see some cracks" as a global economic slowdown that began in 2022 continues into 2023.
And, according to Simon Moores, CEO of Benchmark Mineral Intelligence, a price reporting agency for the EV supply chain, "softening demand for the global EV market" is a bigger driver of price cuts than interest rate hikes.
Moores added that when it comes to demand, "backlog orders have come down significantly for Tesla," making price cuts is "a good way to increase the immediate- and medium-term sales pipeline".
The EV battle is heating up.
Finally, there is Tesla.isn't the only name in the EV game anymore. Traditional automakers have begun to catch up after years of being the only real player in the industry, bringing rival offerings to consumers looking to switch from gas.
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