Tesla’s 6th price cut in 2023

[xponents]

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If you make all of those “available“ features on the ioniq 6 that are standard on the m3, then it would increase in price. Dont get me wrong, I love ioniq but…. it would be a tough decision.

 

[borski]

Are Tesla's price cuts really any different from legacy manufacturers increasing their incentives to boost sales? The effect is the same on the customer's price paid.

If this is predatory pricing, then shouldn't amazon ban discounts?

No. Discounts are fine; it’s when the actual MSRP changes that things get iffy. Depreciation is generally considered off MSRP, not off “what you can get if for new because of incentives.”

But, to be clear, Amazon *does* engage in predatory pricing and preferential treatment of their own products (Amazon Basics, etc.). There have been multiple public conversations about this.

Issue Brief: How Amazon Exploits and Undermines Small Businesses, and Why Breaking It Up Would Revive American Entrepreneurship - Institute for Local Self-Reliance

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ilsr.org

Amazon bullies partners and vendors, says antitrust subcommittee

The House Judiciary subcommittee on antitrust said in a Tuesday report that Amazon's retail dominance gives it monopoly power over third-party sellers.

www.cnbc.com

How low prices could make for an antitrust case against Amazon

A theory of “predatory pricing”

www.theverge.com

 

[idiot900]

It's a matter of both degree and motive. Recent Tesla price cuts have gone as high as $31,000 for one model. I don't remember any manufacturer incentive programs that provided proportionately deep price relief, nor has there been any suspicion that a legacy manufacturer might have been trying to knock out a rival from competition with incentive programs.

As always, a well thought out and high quality response - thanks.

Agree in general. Musk appears to view Lucid as a real threat to his business, especially once they start competing with Model 3/Y.

If you add manufacturer incentives to the usual customer-dealer bargaining and recent inflation, for an expensive luxury car, is a $31k effective cut really all that wild? This is not a rhetorical question as my Lucid is the most expensive car I've ever had.

 

[KySerenity]

I’m not sure I get the predatory pricing logic. Their prices (and margins) have been absurd for a couple of years. Now they have to drop them to industry average margins to avoid massive inventory pile ups.

To me the gouging was what was offensive (not that it wasn’t happening with other manufacturers, it’s just that the others were wrought by their dealers). Now they seem to be a fair price for what you get (ie they are not luxury cars so why should they be priced like one).

A recent article in the local newspaper suggested Tesla could sell their vehicles at cost and still be successful. With increasing numbers of Tesla vehicles on the road, the company will continue to profit from their Superchargers, FSD subscribers, and Tesla vehicle insurance.

High volume sales leads to higher profits from post-delivery costs (charging, insurance, FSD).

 

[joec]

A recent article in the local newspaper suggested Tesla could sell their vehicles at cost and still be successful. With increasing numbers of Tesla vehicles on the road, the company will continue to profit from their Superchargers, FSD subscribers, and Tesla vehicle insurance.

High volume sales leads to higher profits from post-delivery costs (charging, insurance, FSD).

True, until the world figures out FSD is never going to materialize. Or at least not for another 20+ years.

Tesla stock is still way overvalued. It will face a larger correction eventually.

 

[HariK]

If you make all of those “available“ features on the ioniq 6 that are standard on the m3, then it would increase in price. Dont get me wrong, I love ioniq but…. it would be a tough decision.

Then you want to add Auto Pilot to Model 3 as well if not FSD. Bottom line Model 3 interior is worse than Toyota Corolla. Ioniq 6 is far better. The fit and finish of Model 3 is poor and a single dosplay in the middle is a hazard to look down while driving. You get Model 3 if cost is a factor and you ignore other aspects.

 

[HariK]

True, until the world figures out FSD is never going to materialize. Or at least not for another 20+ years.

Tesla stock is still way overvalued. It will face a larger correction eventually.

Any well established growth company historically has a PE of about 30% higher than average PE of S & P 500 which puts it at 30 to 35 range vs 48 now. I see a 15 to 20% downside as the margins fall and volumes do not make up for the lower margin. What Tesla charges for Auto Pilot and FSD will also fall because a lot of ICE cars have the equivalent of Autopilot. A lot of people who are budget conscious will look at a plug in Hybrid. Price war has just begun on the low end to Mid Range where Tesla is.

 

[HariK]

A recent article in the local newspaper suggested Tesla could sell their vehicles at cost and still be successful. With increasing numbers of Tesla vehicles on the road, the company will continue to profit from their Superchargers, FSD subscribers, and Tesla vehicle insurance.

High volume sales leads to higher profits from post-delivery costs (charging, insurance, FSD).

Talking about insurance, what I pay for Lucid Air Pure is much less than my friends pay for a Model S. That should tell you something. The Tesla supercharger prices have to come down because EA is cheaper and so can ChargePoint depending on which location. Also, the competition for Model Y will not be a similar sized Lucid but ioniq 5, Genesis GV60, Chevy Equinox, Chevy Blazer, Polestar, Fisker Ocean

 

[off]

I feel bad for Hyundai, their EV line was really set to take off until the debacle of the revision of the federal EV credit. There is also the issue of availability, sure, I'd rather a Ioniq 5/6 over a 3/Y, but for the folks in the this space of the market, the availability and credit are deciding factors in the purchasing decision.

 

[xponents]

Then you want to add Auto Pilot to Model 3 as well if not FSD. Bottom line Model 3 interior is worse than Toyota Corolla. Ioniq 6 is far better. The fit and finish of Model 3 is poor and a single dosplay in the middle is a hazard to look down while driving. You get Model 3 if cost is a factor and you ignore other aspects.

Just realized that, and its not a cheap option for glorified software.

 

[LCIDdreams]

You are right about Tesla's margins, which have been a recent keystone propping up outsized multiples in the stock price. The recent margins had replaced the earlier keystone of the stock price, which was the uniqueness/superiority of Tesla technology -- something that Lucid had a significant hand in knocking out.

However, determining whether there is predatory pricing in contravention of U.S. anti-trust law is a two-step process. The first step is to look at what drove the price decreases, and there are several theories afoot regarding that. One entirely credible theory is yours about lagging demand. Another theory, espoused by my brother, is that FSD is finally within sight, and Musk is willing to take margin erosion to increase the size of the fleet to enhance the revenue stream from subscriptions once true FSD arrives. (I would have more confidence in that theory if we hadn't been hearing promises that FSD was just months away for some years now.) Then there's my theory about the setup for a knock-out swing at the competition. Of course, the real motive in these rapid, steep price decreases could be a combination of any of these theories and other plausible ones.

The second step is to see what happens with Tesla pricing should these reductions result in reducing or removing competition. If pricing after such an event moves toward returning margins to pre-reduction levels, then the presumption of an illicit motive arises and becomes actionable under anti-trust law. Tesla could, of course, still present defenses against such a presumption, but it would be game on for the anti-trust lawyers at that point.

Only one thing is clear at this point: Tesla has royally ticked off customers from the past year or two who have seen the resale value of their Teslas plummet in the face of these rapid-fire price changes.

I think you are way overthinking this. If they don’t reduce prices then they are going to be stuck with growing inventory (I don’t think FSD is just around the corner . Even at current levels I think they are just “fairly” priced, not a particularly good deal and nothing like bargain basement. My guess is the vast majority of buyers finance, and for them the current prices at 6.5% may not be that different from 2022 prices at 2.5%.

Given the 60% year on year growth of the EV market it’s hard to see half decent EV competition being removed from the market, except for cars that are already not competitive with anything (the Mazda EV comes to mind and would only have itself to blame).

It might accelerate EV transition and speed up the removal of some ICE models from the market, but Tesla has what, maybe 5% of the US car market? It’s hard to see an anti trust suit come out of that.

 

[LCIDdreams]

A recent article in the local newspaper suggested Tesla could sell their vehicles at cost and still be successful. With increasing numbers of Tesla vehicles on the road, the company will continue to profit from their Superchargers, FSD subscribers, and Tesla vehicle insurance.

High volume sales leads to higher profits from post-delivery costs (charging, insurance, FSD).

Their free cash flow is down by 80% since reducing prices. Admittedly FCF was at extortionate levels before.

The vast majority of the money they make is from vehicle profits but I guess in theory they could sell the cars at cost and still make a little profit from services. It’s not like game consoles though- I just don’t see supercharging, insurance being big money makers and am pretty sure FSD take rate is really low (because it doesn’t work)

 

[hmp10]

I think you are way overthinking this.

Yeah, I've been known to do that. Welcome to my head.

It might accelerate EV transition and speed up the removal of some ICE models from the market, but Tesla has what, maybe 5% of the US car market? It’s hard to see an anti trust suit come out of that.

A lot more water would have to flow under the bridge before this ever became an anti-trust action, or even an investigation. However, the basis for assessing Tesla's market dominance would probably be held to be the EV market, not the wider automotive market -- and Tesla clearly dominates the EV market.

 

[LCIDdreams]

Yeah, I've been known to do that. Welcome to my head.




A lot more water would have to flow under the bridge before this ever became an anti-trust action, or even an investigation. However, the basis for assessing Tesla's market dominance would probably be held to be the EV market, not the wider automotive market -- and Tesla clearly dominates the EV market.

Even if you look at it under the lens of EV market share (which doesn’t seem relevant to me, as EVs are competing with all cars at this point) I can’t comprehend a scenario where Teslas share increases in the coming years.

 

[hmp10]

Even if you look at it under the lens of EV market share (which doesn’t seem relevant to me, as EVs are competing with all cars at this point) I can’t comprehend a scenario where Teslas share increases in the coming years.

It's been eons since I took antitrust law in law school. But if I remember correctly, predatory pricing can stand alone as a violation if it knocks out competitors even if it doesn't result in a dominant or monopoly position. What it necessary is that the violator be able later to raise and maintain higher prices.

Again, I think a lot more would have to emerge from this for Tesla to get taken to the woodshed. And even were it ultimately to appear that predatory pricing was part of Musk's agenda, the courts are fairly hostile to such prosecutions and set a very high bar for proof of intent which is usually difficult to meet.

This is exactly the kind of legal sandbox in which Musk likes to play his stunts -- test limits, use the opportunity to ridicule authorities, milk it for all the publicity value it's worth, hire a phalanx of lawyers if the government rattles any sabers, and usually walk away. As he proved with the SEC sanctions from the Saudi deal and with his defiance of Alameda County health authorities, any penalty he feels he can ignore with eventual impunity is no penalty to him at all.

 

[DBV]

Then you want to add Auto Pilot to Model 3 as well if not FSD. Bottom line Model 3 interior is worse than Toyota Corolla. Ioniq 6 is far better. The fit and finish of Model 3 is poor and a single dosplay in the middle is a hazard to look down while driving. You get Model 3 if cost is a factor and you ignore other aspects.

I would take a Tesla over the Ioniq 6 all day long. Same with most people I know too.

 

[DBV]

Even if you look at it under the lens of EV market share (which doesn’t seem relevant to me, as EVs are competing with all cars at this point) I can’t comprehend a scenario where Teslas share increases in the coming years.

I still think Tesla will dominate the market in the short term. Long term is anyones guess, but you just never know with Tesla and what Elon pulls out of his bag.

 

[HariK]

I still think Tesla will dominate the market in the short term. Long term is anyones guess, but you just never know with Tesla and what Elon pulls out of his bag.

Tesla will have volume on the low end model 3 and Y. So, yes they have a larger market share.

 

[Tesla2.0]

Electric Day, took a demo drive of Model Y with FSD on crazy weekend Houston traffic. FSD drive me from parking lot to parking all the way on and off freeway. Ride quality is not impressed, but the intelligence of latest version of FSD was quite impressive.

 

[off]

You went to the event at Ikea, sounded like fun, wanted to go, but it got in the way of cycling