Tesla says price cuts were due to “partial normalisation of cost inflation”

Tesla shocked a lot of people last night when they slashed prices on their vehicles in Canada, the US, and Europe, in some cases by more than 20%. The new prices went live without an official announcement from Tesla, but this morning they have issued a statement in Germany which sheds some light on why they issued such drastic price cuts.

According to a statement by a Tesla spokesperson in Germany on Friday, Tesla was able to lower their prices and make their cars more accessible for consumers due to “partial normalisation of cost inflation” after more than a year of price successive increases due to rising inflation and supply chain shortages.

“At the end of a turbulent year with interruptions to the supply chain, we have achieved a partial normalisation of cost inflation, which gives us the confidence to pass this relief onto our customers.” (via Reuters)

Even though the price cuts were steep in many cases, Tesla was able to do so because of their industry-leading margins, which in 2022 rose to near 30%. The prices are so low in fact that with the Model 3 and Model Y in some markets have been able to undercut competitor EVs like the Hyundai IONIQ 5, VW ID.3 and others.

While the price cuts certainly made Tesla cars more affordable to consumers, that was particularly the case in countries where price cuts to the Model 3 and Model Y made them eligible for incentives.

In Canada the Model 3 RWD variant is now priced below the $55,000, making it eligible for the $5,000 iZEV incentive. This eligibility has yet to appear on Tesla’s website, but we have been told this is because the Tesla Policy team in Canada is still finalizing the details with Transport Canada, but we expect it to be approved soon.

In the US the price cuts brought the Model 3 Performance and the five seat variant of the Model Y Long Range now qualify for the $7,500 tax credit.

We have heard similar stories coming out of Europe where in several countries the lowered prices mean incentives or tax rebates are now available for the Model 3 and Model Y.

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