Tesla cut prices again this morning, and competitors, who have decided to either take the same strategy by slashing prices themselves or have chosen not to play into Elon Musk’s game, are in a weird and awkward position.
Tesla Model S and Model X units were the most recent vehicles in the automaker’s lineup to receive price cuts. While these vehicles only make up roughly 5 percent of Tesla’s overall sales volume based on last year’s sales figures, the price cuts give automakers with competing models another thing to think about.
Tesla Model X and Model S get price reduction in the United States
For startups, there are few that can even think about cutting costs at this point. Companies like Rivian, Lucid, and Lordstown are unable to shave prices currently and at the drop of a hat like Tesla. Every dollar and every sale right now counts, and there is not much wiggle room.
For traditional companies, the wiggle room on pricing for EVs is also extremely small. Ford, for example, while announcing plans to increase production of popular EV models this weekend, is still struggling with availability.
If you went to a Ford, GM, or other legacy dealership right now and tried to order a car, it might be extremely difficult, and people who just bought cars don’t want to see that their vehicle was just subjected to a price cut of thousands of dollars. When Ford cut Mustang Mach-E prices earlier this year, owners who took delivery just before the decreases were not pleased, and the automaker couldn’t do much to appease them.
Tesla’s strengths are plentiful, and they expand across nearly every part of its business. Its charging infrastructure is strong, the company can get you a car in a matter of a few weeks, and its pricing can be adjusted at any moment.
If it needs to adjust prices to make margins a little more appealing to investors and analysts, it can. If it needs to spike demand with a dramatic cut like it did this morning, it can do that too. It’s not a perfect company, though. Service and Customer Communications for Tesla are incredibly weak; it is one of the most publicly-criticized portions of the company. Despite that, people continue to buy Teslas in droves.
With another Tesla price cut, companies are in a serious pickle. Tesla could decide in a week to cut prices again, making consumers more prone to choose their product over another. The advantages go past price, but what that number says is the first thing consumers look at when considering a vehicle. The lower they get, the more attractive they become to consumers.
Why Tesla dropped the prices of the Model S and Model X is unknown, but Gary Black seems to believe the move is to encourage more sales of the flagship vehicles, which, as previously mentioned, do not contribute to the company’s overall sales volume very much.
.@Tesla is cutting prices for the second time this year. But investor @garyblack00 tells @SaraEisen that he’s not worried about demand, explaining that they’re trying to adjust prices to encourage growth for the Model S & X vehicles. pic.twitter.com/zOobHZDRJE
— Squawk on the Street (@SquawkStreet) March 6, 2023
However, there are other things: Model X vehicles are being equipped with the new Hardware 4 computer, Tesla has tried to get Free Supercharging-equipped cars off the roads, and it could be another way to push sales upward.
Whatever the reasoning is, Tesla put competitors in another weird spot. With the constant price changes that occurred earlier this year, there was already doubt in place about what competitors could do to remain competitive. The most recent adjustment in prices makes things even more difficult and reminds everyone that Tesla is ultimately the king of the hill.
Disclosure: Joey Klender is a Tesla Shareholder.
I’d love to hear from you! If you have any comments, concerns, or questions, please email me at joey@teslarati.com. You can also reach me on Twitter @KlenderJoey, or if you have news tips, you can email us at tips@teslarati.com.
Elon Musk
Elon Musk reiterates Tesla Optimus’ most sci-fi potential yet
Musk shared his comments in a series of posts on social media platform X.
Elon Musk recently reiterated one of the most ambitious forecasts for Tesla’s humanoid robot, Optimus, stating it could become the first real-world example of a Von Neumann machine. He also noted once more that Optimus would be Tesla’s biggest product.
Musk shared his comments in a series of posts on social media platform X.
Optimus as a von Neumann machine
In response to a post on X that pondered on sci-fi timelines becoming real, Musk wrote that “Optimus will be the first Von Neumann machine, capable of building civilization by itself on any viable planet.” In a separate post, Musk wrote that Optimus will be Tesla’s “biggest product ever,” a phrase he has used in the past to describe the humanoid robot’s importance to the electric vehicle maker.
A Von Neumann machine is a class of theoretical self-replicating systems originally proposed in the mid-20th century by the mathematician John von Neumann. In his concept, von Neumann described machines that could travel to other worlds, use local materials to create copies of themselves, and carry out large-scale tasks without outside intervention.
Elon Musk’s broader plans
Considering Musk’s comments, it appears that Optimus would eventually be capable of performing complex work autonomously in environments beyond Earth. If Optimus could achieve such a feat, it could very well unlock humanity’s capability to explore locations beyond Earth. The idea of space exploration becomes more than feasible.
Elon Musk has discussed space-based AI compute, large-scale robotic production, and the role of SpaceX’s Starship in transporting hardware and materials to other planets. While Musk did not detail how Optimus would fit with SpaceX’s exploration activities, his Von Neumann machine comments suggest he is looking at Tesla’s robotics as part of a potential interplanetary ecosystem.
News
Tesla China January wholesale sales rise 9% year-on-year
Tesla reported January wholesale sales of 69,129 China-made vehicles, as per data released by the China Passenger Car Association.
Tesla China reported January wholesale sales of 69,129 Giga Shanghai-made vehicles, as per data released by the China Passenger Car Association (CPCA). The figure includes both domestic sales and exports from Gigafactory Shanghai.
The total represented a 9.32% increase from January last year but a 28.86% decline from December’s 97,171 units.
China EV market trends
The CPCA estimated that China’s passenger new energy vehicle wholesale volume reached about 900,000 units in January, up 1% year-on-year but down 42% from December. Demand has been pressured by the start-of-year slow season, a 5% additional purchase tax cost, and uncertainty around the transition of vehicle trade-in subsidies, as noted in a report from CNEV Post.
Market leader BYD sold 210,051 NEVs in January, down 30.11% year-on-year and 50.04% month-on-month, as per data released on February 1. Tesla China’s year-over-year growth then is quite interesting, as the company’s vehicles seem to be selling very well despite headwinds in the market.
Tesla China’s strategies
To counter weaker seasonal demand, Tesla China launched a low-interest financing program on January 6, offering up to seven-year terms on select produced vehicles. The move marked the first time an automaker offered financing of that length in the Chinese market.
Several rivals, including Xiaomi, Li Auto, XPeng, and NIO, later introduced similar incentives. Tesla China then further increased promotions on January 26 by reinstating insurance subsidies for the Model 3 sedan. The CPCA is expected to release Tesla’s China retail sales and export breakdown later this month.
News
Tesla’s Apple CarPlay ambitions are not dead, they’re still in the works
For what it’s worth, as a Tesla owner, I don’t particularly see the need for CarPlay, as I have found the in-car system that the company has developed to be superior. However, many people are in love with CarPlay simply because, when it’s in a car that is capable, it is really great.
Tesla’s Apple CarPlay ambitions appeared to be dead in the water after a large amount of speculation late last year that the company would add the user interface seemed to cool down after several weeks of reports.
However, it appears that CarPlay might make its way to Tesla vehicles after all, as a recent report seems to indicate that it is still being worked on by software teams for the company.
The real question is whether it is truly needed or if it is just a want by so many owners that Tesla is listening and deciding to proceed with its development.
Back in November, Bloomberg reported that Tesla was in the process of testing Apple CarPlay within its vehicles, which was a major development considering the company had resisted adopting UIs outside of its own for many years.
Nearly one-third of car buyers considered the lack of CarPlay as a deal-breaker when buying their cars, a study from McKinsey & Co. outlined. This could be a driving decision in Tesla’s inability to abandon the development of CarPlay in its vehicles, especially as it lost a major advantage that appealed to consumers last year: the $7,500 EV tax credit.
Tesla owners propose interesting theory about Apple CarPlay and EV tax credit
Although we saw little to no movement on it since the November speculation, Tesla is now reportedly in the process of still developing the user interface. Mark Gurman, a Bloomberg writer with a weekly newsletter, stated that CarPlay is “still in the works” at Tesla and that more concrete information will be available “soon” regarding its development.
While Tesla already has a very capable and widely accepted user interface, CarPlay would still be an advantage, considering many people have used it in their vehicles for years. Just like smartphones, many people get comfortable with an operating system or style and are resistant to using a new one. This could be a big reason for Tesla attempting to get it in their own cars.
Tesla gets updated “Apple CarPlay” hack that can work on new models
For what it’s worth, as a Tesla owner, I don’t particularly see the need for CarPlay, as I have found the in-car system that the company has developed to be superior. However, many people are in love with CarPlay simply because, when it’s in a car that is capable, it is really great.
It holds one distinct advantage over Tesla’s UI in my opinion, and that’s the ability to read and respond to text messages, which is something that is available within a Tesla, but is not as user-friendly.
With that being said, I would still give CarPlay a shot in my Tesla. I didn’t particularly enjoy it in my Bronco Sport, but that was because Ford’s software was a bit laggy with it. If it were as smooth as Tesla’s UI, which I think it would be, it could be a really great addition to the vehicle.
Elon Musk reiterates Tesla Optimus’ most sci-fi potential yet
Tesla China January wholesale sales rise 9% year-on-year
