Texas-based electric vehicle giant Tesla has announced that it will increase Model Y prices in select European markets by around $2,177 beginning on March 22, 2024. The announcement comes just days after Tesla said on social media platform X that it would raise prices for the Model Y electric car in the United States by $1,000 from next month. On March 1, 2024, the pioneering EV maker increased prices for the long-range and rear-wheel drive variants of the Model Y by $1,000 to $48,990 and $43,990 respectively.
Although Tesla has been the top-selling battery electric vehicle (BEV) company on the globe for most of the past decade, it has been facing increasingly stiff competition from the Chinese market. Supported by massive subsidies by the government as well as strategic partnerships, Chinese electric vehicle companies such as BYD have been putting significant pressure on Tesla for the past couple of years.
In an attempt to remain competitive against the tide of cheap Chinese EVs, Tesla embarked on a price discount war that forced most EV makers across the board to cut prices. These discounts may have generated extra sales, but they did little to improve Tesla’s bottom line.
Unfortunately, the price cuts also weren’t enough to keep BYD from surpassing Tesla as the best-selling EV company in the world in the last quarter of 2023. Waning electric-vehicle demand due to rising interest rates and a high cost of living added to Tesla’s losses as the year drew to a close. Furthermore, Tesla warned that it would likely experience “notably lower” levels of sales growth in 2024 because it would focus on producing its next-generation electric car.
According to Tesla CEO Elon Musk, Tesla is dealing with one of the main challenges of production: manufacturing facilities need constant demand for maximum efficiency, but vehicle demand tends to be seasonal. Electric vehicle demand is also significantly lower compared to internal combustion engine cars as EVs for a variety of reasons.
Electric cars are more expensive than the average internal combustion engine vehicle, and their limited range coupled with an insufficient and unreliable network of public charging stations contribute to a phenomenon called range anxiety, which dampens EV adoption.
After temporarily slashing prices in the European and American markets, Tesla is now raising prices. With most of the early-adopter market fully saturated, Tesla will have to work hard to compete with established automakers and EV startups to capture the mainstream vehicle market.
The price increases being implemented by Tesla show that manufacturers are under pressure to be profitable despite the stiff competition presented by foreign competitors, especially those from China. Different companies will take different steps to lock in profits, and one may not expect other companies such as Cenntro Electric Group Ltd. (NASDAQ: CENN) to immediately follow the lead of Tesla and raise their prices.
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