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Tesla, as the apex predator of the EV world, continues to sacrifice its industry-leading profit margin to maintain demand. However, this strategy of aggressive price cuts now poses an outsized risk to the EV giant’s nascent competitors, including Lucid Group.
BREAKING: @Tesla has reduced the starting prices of the Model S & Model X in the US.
• Model S AWD: $89,990 (from $94,990)
• Model S Plaid: $109,990 (from $114,990)
• Model X AWD: $99,990 (from $109,990)
• Model X Plaid: $109,990 (from $119,990)Model S/X Plaid are now the… pic.twitter.com/YACFu3BCS2
— Sawyer Merritt (@SawyerMerritt) March 6, 2023
Earlier today, Tesla reduced the base price of its Model S by 5.3 percent and that of Model X by 9.1 percent in the US. Moreover, following material price cuts, the Plaid versions of both models are now priced at $109,990. Previously, the Model S Plaid carried a retail price of $114,990, while the Model X Plaid retailed at $119,990 in the US.
Of course, Tesla has already discounted the price of its Model 3 and Model Y EVs by around 20 percent. These aggressive price cuts have allowed Tesla to regain the delivery momentum that it had lost toward the end of last year.
Tesla has reduced the price of unsold cars in Europe by 6%. These are not showroom cars. These are normal imports from China that have no buyers yet. You can see it here:
• UK https://t.co/wgUmSG1Mme
• Germany https://t.co/7tuayDaAO5
• France https://t.co/0OUTyiBkEJ pic.twitter.com/5MHUODQIW1— Troy Teslike (@TroyTeslike) March 4, 2023
Meanwhile, Tesla has also reduced the price of its unsold EVs in Europe by around 6 percent.
$TSLA struggling in the EU this quarter, despite 20% price cuts.
Jan/Feb deliveries +99% YoY (impressive) but -10% vs Oct/Nov'22.
While volumes are 2x YoY, revenues & profits will be down YoY in Q1. $TSLA's market share is getting crushed in top-3 EU markets. https://t.co/jg6ejhPeMk
— Motorhead (@BradMunchen) March 6, 2023
These price cuts are in addition to a general discount of around 20 percent in Europe.
While most analysts expect Tesla’s price-cutting strategy to materially curtail its profit in the ongoing quarter, this “beggar thy competitor” strategy portends a catastrophic plunge in demand for companies such as Lucid Group, whose Air EV competes directly with Tesla’s Model S and Model X.
Even before today’s move by Tesla, Lucid Group was suffering from elevated inventory levels. As we noted last week, Lucid Group’s deliveries have continued to lag its production cadence. In Q4, this mismatch stood at 1,561 units. When taking into account the full-year figures, this mismatch increases to 2,811 units. Additionally, Lucid Group is now targeting a full-year production of just around 14,000 units, substantially below the output of 49,000 units that the company had promised during its pre-SPAC-merger phase.
In another troubling sign, the reservations for the Air EV declined by around 6,000 units during the fourth quarter of 2022 to around 28,000 units. This suggests that buyers might be having second thoughts about their decision to bet on a relatively new entrant in this increasingly challenging field.
