February 22, 2024

Brighton Journal

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Tesla sales rebound after sharp price cuts

Tesla sales rebound after sharp price cuts

Tesla sales jumped during the last three months of 2023 after the automaker cut prices and customers rushed to take advantage of tax breaks on electric cars – allowances that will be difficult to achieve in 2024.

Company He said on Tuesday It sold 484,500 cars in the fourth quarter, up from 435,000 in the third quarter and 405,000 in the fourth quarter of 2022. Over the full year, Tesla sold 1.8 million cars. The gains put Tesla on track to sell more than two million cars in 2024, which could overtake established automakers such as Mercedes-Benz and Renault.

A rebound in sales during the fourth quarter should help allay investor concerns about whether Tesla is able to defend its dominance of the electric vehicle market as it faces increasing competition from traditional automakers.

Over the past year, Tesla has lost market share to competitors such as General Motors, Hyundai, Ford Motor Company, and Volkswagen as they introduce more electric vehicles. Tesla accounts for half of all electric vehicles sold in the United States. In 2022, Tesla captured two-thirds of the market.

Electric car maker Rivian said on Tuesday that it sold nearly 14,000 cars in the last three months of the year. This number was up significantly from the previous year but was down about 10 percent from the third quarter.

In China, the largest market for electric cars, Tesla faces intense competition from BYD and other Chinese automakers. BYD sold 526,000 fully electric vehicles worldwide in the fourth quarter, surpassing Tesla, a feat many auto analysts had expected given the Chinese company's rapid growth.

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Chinese automakers have moved faster to offer a wide range of affordable electric models as the market expands beyond wealthy early adopters of the technology. They are the core customers who have purchased Teslas throughout the company's existence.

“The customers who are buying electric vehicles now are second users, who have fundamentally different needs,” said Shai Natarajan, partner at Mobility Impact Partners, a private equity fund focused on investing in sustainable transportation. “They care about tangible, immediately achievable reductions in total cost of ownership, and they care about convenience.”

In Europe, Volkswagen, Audi and Skoda sell more electric cars than Tesla, although the Tesla Model Y is by far the best-selling model on the continent, according to data compiled by automotive research firm Schmidt.

In the United States, people interested in purchasing an electric car had a strong incentive to take delivery before the end of the year due to new rules aimed at taking China out of the supply chain.

Tesla had warned on its website that the two less expensive versions of the Model 3 sedan would not be eligible for $7,500 in federal tax credits after December 31. The cars contain batteries made in China. Germany and some other European countries have also canceled subsidies provided to buyers of electric cars.

To maintain sales, Tesla cut prices, offering the Model 3s on its website for well under $30,000 after taking tax credits into account. By late December, the number of low-priced cars listed on the site appeared to have dwindled, indicating the strategy was working. But the price cuts cut into Tesla's profits, which fell 44% in the third quarter from a year earlier.

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Tesla said it will announce fourth-quarter earnings of 2023 on January 24.

While fewer Tesla vehicles will qualify for federal tax credits in 2024, the company is in a better position than most of its competitors. The Performance Edition of the Model 3, which includes upgraded wheels and brakes, will still be eligible for the subsidy, as will all versions of the Model Y SUV, according to Federal government website. Tesla manufactures batteries for those cars at a factory in Nevada operated by Panasonic, allowing it to meet local manufacturing requirements.

This gives Tesla a significant advantage over competitors like Ford, which said its Mustang Mach-E sports car would not be eligible for the credit in the new year.

Ford and others rely on manufacturers in China for critical components. Ford is building battery factories in the United States, but they will not begin production until 2025.

General Motors is building batteries at a new plant in Ohio, but is struggling to get the plant running at full capacity. GM said last December that only the Chevrolet Bolt would be eligible for the tax credits initially. The Cadillac Lyriq and Chevrolet Blazer electric will no longer be eligible.

GM said it is adjusting its supply chain so that those vehicles and others, including electric versions of the Chevrolet Silverado pickup and Equinox sport utility vehicle, become eligible early in the year.

Tesla and other automakers may also benefit from lower interest rates in the new year. Investors are betting that the Federal Reserve and other central banks will start cutting interest rates as inflation declines.

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