Wall Street veteran and Tesla bull Gary Black of The Future Fund LLC recently went on CNBC’s Last Call to share his thoughts about why it would be a good idea for Tesla to start educating its potential customers. Black argued that Tesla’s price cuts don’t make a lot of sense even if they are aggressive since consumers need to be educated on why EVs are better.
Since the year started, Tesla has been engaged in an aggressive pricing strategy that resulted in the company’s lineup of vehicles costing significantly lower than they did at the start of 2023. As per Black and fellow Tesla bull Ross Gerber of Gerber Kawasaki, Tesla’s price cuts may not really be the best strategy for the EV maker, at least for now.
“I just think the whole price cuts that they put in place don’t make a lot of sense… Every time they cut prices on, say, Model Y, by $1,000, it’s costing them $500 million. And really, what they need to do to continue to drive EV adoption is to teach people why an EV is better.
“Communicate, educate. So, it’s a lower operating cost, it’s much easier to just plug it in your garage or in a charger rather than go to a filthy, dirty gas station, the technology is better, the autonomy is better, the resale value is better, and you’re doing something for the environment,” Black said.
During Tesla’s Q1 2023 earnings call, however, executives such as CEO Elon Musk noted that the company could technically sell its vehicles at a very low profit for now since its products could improve over time. This was especially the case with the company’s vehicles, as technologies like Full Self-Driving (FSD) could open opportunities for more profit in the future.
“Tesla is in a uniquely strong strategic position. Because we’re the only ones making cars that technically, we could sell for zero profit for now and then yield actually tremendous economics in the future through autonomy, no one else can do that. I’m not sure how many people will appreciate the profundity of what I’ve just said, but it is extremely significant,” Musk said.
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