Wednesday, February 8, 2023

With its recent price cuts, Tesla is increasingly acting like a legacy carmaker – Autoblog

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David Zalubowski/AP
  • Tesla has been resorting to the same tricks car companies use to paper over their problems.
  • Tesla appears to be struggling with bloated inventory while competitors are running lean.
  • “Now it seems like they’re going to be the same as everyone else,” said analyst Ivan Drury.

Long the biggest disruptor in the automotive industry, Tesla is increasingly acting like the legacy car companies it used to rattle.

Elon Musk’s automaker spent much of the last year resorting to some of the same tricks car companies have long used to paper over their problems, signaling that the company that once scrambled to meet demand is now grappling with the supply and demand balancing act its older competitors know well.

“These are all very normal problems, but the difference is Tesla was the one breaking all the rules,” said Ivan Drury, an automotive analyst for Edmunds. “Now we’re seeing them fall into these same traps all the automakers go down.”

Tesla cuts prices

At the end of 2021, rental-car giant Hertz said it had ordered 10,000 Tesla Model 3s for its fleet. The announcement was met with excitement from EV boosters, but automotive industry experts and executives wondered at the time if this was an early sign of over-building at Tesla. 

By the end of 2022, the electric car maker was offering an unprecedented $7,500 discount on its Model 3 and Model Y vehicles – a surefire sign that Tesla needed to move metal before the end of the year, experts said.

While the discounts in the US expired at the end of December, Tesla continues to mark down its vehicles in China, the world’s biggest auto market. 

Tesla appears to be struggling with bloated inventory at a time when the rest of the automotive industry is running lean. Holiday deals were sparse industry-wide for the third year in a row at the end of 2022, as industry experts pondered whether the days of year-end blowouts were in the rearview mirror for good.

Tesla has rarely discounted its vehicles in the past. Musk has even spoken out against the practice in the past. And the discounts at the end of the year came after months of price hikes, adding to the troubling nature of the deals.

Experts think discounts will continue

Meanwhile, Tesla’s stock price is plummeting amid Musk’s controversies at Twitter and worries from analysts that the car company is essentially operating without a CEO at the moment.

“This is a fork in the road year for Tesla that will either lay the groundwork for its next chapter of growth or continue its slide from the top of the perch with Musk leading the way downhill,” Wedbush analyst Dan Ives wrote in a note earlier this week. 

The true test of Tesla’s resolve will come in the first quarter, Drury said. Experts and analysts will be watching to see if the electric car company returns to its no-discount way of life, or continues to pull from old industry playbooks. 

Following Tesla’s fourth quarter delivery results earlier this week, Deutsche Bank analyst Emmanuel Rosner said he expects price cuts to continue.

“Further price actions will likely be implemented to align demand with supply,” Rosner wrote in a note. “We expect challenging headlines around demand softening and associated price cuts to continue.”

Even if Tesla isn’t offering cash deals, it could still incentivize purchases by pulling other levers. A common incentive at this time of year is free maintenance, Drury said, which is comparable to Tesla’s offer for 10,000 miles of free Supercharging.

“This is a company that raced to be different, but now it seems like they’re going to be the same as everyone else,” Drury said.

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Disclaimer: This story is generated from RSS Feed and has not been created or edited by Waba News. Publisher: Autoblog

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