Winter tends to come around this time every year, but don’t tell that to Elon Musk.
The Tesla CEO is blaming the onset of colder temperatures for a $1,000 discount off the price tag of his Model Y. The vital crossover is responsible for two out of every three cars his company sells worldwide and any material weakening in demand could endanger his already tepid guidance for this year.
The latest in a series of price cuts that have wreaked cascading harm to the value of used Teslas now reduces the Model Y’s starting price to $42,990, before a federal tax credit that can cut up to $7,500 of the sticker price of EVs.
“Since most people don’t love to buy cars in the middle of winter, Tesla is offering a $1,000 incentive to do so,” Musk posted on Sunday, discovering a new excuse for discounting.
All automakers that compete in the U.S. market are naturally subject to the same conditions, the arrival of winter being one. There is however one weather-related factor that certainly didn’t help demand for Tesla as the domestic EV leader.
A raft of headlines warned prospective car buyers the January cold snap that sent temperatures plunging throughout much of the country could rapidly drain EV batteries, reduce driving ranges appreciably and lead to malfunctioning EV charging stations.
Tesla claims this particular discount will only be valid through February, but there is absolutely nothing requiring it to do so. As long as his ageing Model Y lacks a refreshed version, speculated to arrive in the U.S. next year, there really is only one potential catalyst that could drive prices higher: a Federal Reserve interest rate cut.
Musk’s decision to keep cutting threatens to reignite a nearly year-long debate over whether repeated discounting, occasionally punctuated by a token raise, should be the only lever for stimulating demand.
Critics argue Musk has trapped Tesla in a vicious circle by training consumers to postpone their purchase in the hopes of getting a better deal in the future. Instead they believe he should finally get off his high horse and embrace advertising rather than stigmatize it.
At $7M for a 30 second Super Bowl ad, $TSLA would have to sell 875 incremental cars (@$8k gross profit per car) to justify the cost of the ad. And the follow up interest from TSLA paying for a Super Bowl ad would be huge. Instead $TSLA cuts price by $1,000 per Model Y in the US… https://t.co/ZrqxUpRCcB