Tesla Cuts US Sales Prices Amidst EV Subsidy Phase-Out – Report

by under News on 03 Jan 2019 11:42:43 AM03 Jan 2019

Shares close nearly 7% lower as a result.

Tesla Cuts US Sales Prices Amidst EV Subsidy Phase-Out – Gallery

American EV firm Tesla has faced a bearish day on the NASDAQ with the company closing the first trade day of the new year some 6.8% lower than when it started, amidst concerns regarding profitability as the US government starts lowering the green car tax credits Tesla’s been entitled to since the company began some 15-years ago.

In the United States, carmakers are allowed a US$7,500 tax credit for the first 200,000 zero-emissions vehicles they make. Tesla was assured this tax credit throughout 2018 and now, the credit is to be reduced by 50% every 6-months until the credit is entirely phased out. In response to this reduction, Tesla has slashed US$2,000 off of all its models, and assured customers that it will absorb the difference for cars that were scheduled to be delivered while the credit was offered but were delayed by production issues.

Tesla Cuts US Sales Prices Amidst EV Subsidy Phase-Out – Gallery

Analysts suggest that there will be some serious revenue lost as a result of the price cut, which has no doubt fuelled the more reserved market sentiment towards the company since the news dropped. Further hurting the company’s stock performance is the fact that while Tesla’s Model 3 production numbers are in keeping with Musk’s pledge (they delivered 63,150 Model 3s in Q4 2018), it’s still somewhat short of forecasts made by market analysts who had assumed there’d have been a surge in demand ahead of the 2019 tax credit phase-out.

Based on calculations by Reuters, the average profit per-car for Tesla was US$3,200 per car delivered in the third-quarter of 2018. The US$2,000 price cut would whack more than half of that, hence why the stock market is starting to shy away from Tesla stock. In trading yesterday, the company lost as much as 10% during trading, but closed the day down 6.8% at US310.12.

Tesla Cuts US Sales Prices Amidst EV Subsidy Phase-Out – Gallery

In China, Tesla’s adjusted its prices for the second time in two months, with the aim to reduce the impact of the US-China trade tariffs to ensure that cars are “more affordable for customers.” Prices of the Model X and Model S were reduced by between 12%-26% following a decision by the Chinese government to suspend any additional tariffs of US imports for the first three months of this year.

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