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Tesla’s pricing strategy comes down to one key difference from its competitors

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Tesla’s pricing strategy comes down to one key difference from its competitors, and as the automaker recently cut pricing for the fifth time this year, the method to its madness is being further examined.

Tesla’s most recent price cuts on Friday are a far cry from its most drastic, which came in January after the Model Y was discounted by $13,000, nearly 20 percent on some trim levels.

While legacy automakers are not prone to cut prices by that much, Barron’s notes in a recent article that substantial price cuts for these companies are usually $1,000, and not the $13,000 that Tesla is able to apply to its vehicles because of its dealership model:

“Tesla, of course, doesn’t have a traditional dealer network. It is both car maker and car dealer. That is one reason investors should expect more volatility from Tesla versus its competition. All of its discounts are visible. Dealer-related discounts rarely rise to become investor-level news.”

Tesla customers have a distinct advantage in terms of consumerism, as they avoid basically the most stressful part of car buying, and that’s pricing. All too often, people who are at dealerships to buy a car are stuck wondering if someone else bought the same model for a lesser price, if they should have haggled more, and if there was more negotiating to be done.

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The direct-to-consumer model has changed this.

The dealership model is not the only reason for the price cuts, but it is one major influence. Legacy automakers like Ford and GM are often cutting prices to clear their lots, bringing new vehicles to their inventories, and generating revenue for the larger corporation.

The reasoning for Tesla’s massive price cuts all depends on who you ask. Some analysts will say it is to recapture market share, and Tesla has the ability to control prices to manipulate competitors and consumer interest in their products. Others will say it is to counter weakening demand, although Tesla’s delivery figures increase quarter-over-quarter regularly.

Tesla price cuts have analysts split

Tesla can almost utilize its price cuts as a PR campaign. Meanwhile, an example of a BMW iX being cut by $10,000 without the customer asking was told by auto analyst Mike Ward. These stories do not make it to the media.

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Meanwhile, Tesla’s price cuts apply to everyone and these broad market adjustments make for mass exposure, showing the company reduces prices.

“I assume Tesla’s strategy is based on the assumption of customer retention,” Nicholas Colas of DataTrek said. “Car buyers are a notoriously fickle lot, with only about 50 percent brand loyalty at the next purchase. Maybe a new technology like EVs is different, with higher retention.”

Lower prices will impact Tesla’s margins, which are among the strongest in the industry. However, more important is the retention of its customer base and a growth in sales as it still is only delivering a fraction of what legacy automakers will this year, even if their figures count ICE vehicles.

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.

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Joey has been a journalist covering electric mobility at TESLARATI since August 2019. In his spare time, Joey is playing golf, watching MMA, or cheering on any of his favorite sports teams, including the Baltimore Ravens and Orioles, Miami Heat, Washington Capitals, and Penn State Nittany Lions. You can get in touch with joey at joey@teslarati.com. He is also on X @KlenderJoey. If you're looking for great Tesla accessories, check out shop.teslarati.com

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After moving Tesla to Texas, Elon Musk is back in the Bay Area with Neuralink expansion

The news marks a noticeable step in Musk’s expanding presence in the Bay Area, despite the move of his biggest companies, Tesla and SpaceX, to Texas.

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Credit: Steve Jurvetson/Twitter

Recent reports have indicated that Elon Musk’s brain-implant startup, Neuralink, has leased a five-story, 144,000-square-foot building in South San Francisco. At the same time, Musk’s artificial intelligence startup xAI is reportedly also looking around for a Bay Area office. 

The news marks a noticeable step in Musk’s expanding presence in the Bay Area, despite the move of his biggest companies, Tesla and SpaceX, to Texas.

Neuralink’s Bay Area expansion

As noted in a report from the San Francisco Business Times, the property that Neuralink has leased is located at 499 Forbes Boulevard, and it was built by Aralon Properties before it was leased to cancer test developer InterVenn Biosciences. The site, however, had remained vacant since 2023 after InterVenn canceled its 10-year lease.

xAI, Musk’s artificial intelligence startup, is reportedly scouting for an even larger Bay Area office as well, as noted in a report from the San Francisco Chronicle. Combined, the two ventures could secure nearly 400,000 square feet of local workspace, a move seen as a symbolic return of sorts for Musk-led innovation to Silicon Valley.

Neuralink’s momentum

Founded in 2016, Neuralink develops brain-computer interfaces intended to help paralyzed patients control digital devices through thought. The company received U.S. regulatory approval in 2023 to begin human trials, with its first patient, quadriplegic Noland Arbaugh, making headlines for his stunning ability to control a computer cursor and play games using only his mind. Since receiving his implant, Arbaugh has stated that he now browses the web, plays video games like Mario Kart, studies neuroscience, and operates his smart home without lifting a finger. 

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Nauralink is only just getting started, with Elon Musk noting on X that the company is busy preparing its next product, Blindsight, for human trials. As per Musk, Neuralink is “aiming to restore (limited) sight to the completely blind next year,” an aggressive target for a potentially life-changing device.

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Tesla Cybercab tests seem to be ramping up again

Elon Musk has stated that he expects the company to achieve a run rate of 2 million Cybercabs annually.

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Credit: @serobinsonjr/X

Tesla seems to be ramping the tests of its autonomous two-seater, the Cybercab, once more. This was hinted at in recent drone footage from both the Fremont Factory and Gigafactory Texas.

The fresh sightings of the Cybercab in the Fremont Factory and Giga Texas have renewed conversations about the vehicle potentially being built with manual controls today. 

Fresh Cybercab tests

As noted by longtime drone operator Joe Tegtmeyer on social media platform X, he recently spotted a Cybercab driving on Giga Texas’ South River Road to the West side. Interestingly enough, the longtime Giga Texas watcher noted that this was the first Cybercab that he had seen conducting road tests in a while.

Over in the Fremont Factory, another Cybercab was spotted driving around the facility’s testing area. Similar to the Cybercab in the Giga Texas sighting, the vehicle that was spotted in the Fremont Factory seemed to be manually driven, at least based on the way it was being steered. This behavior has incited speculations among Tesla watchers that current Cybercab test units have manual controls, unlike their production version, which would have no steering wheel or pedals. 

Cybercab production preparation

The sightings of Cybercabs around the Fremont Factory and Giga Texas bode well for the vehicle’s development and impending production. It does, if any, complement reports that Tesla has been busy setting up production equipment for Giga Texas’ Cybercab production line. At the same time, drone footage around the Giga Texas complex has also revealed that Tesla is stockpiling some Cybercab castings, a likely sign that initial test production of the vehicle might soon begin.

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The Cybercab is expected to be Tesla’s highest volume vehicle, with CEO Elon Musk stating that he expects the company to achieve a run rate of 2 million Cybercabs annually. He also mentioned that the Cybercab will be easy to produce thanks to its Unboxed manufacturing process, so much so that its production would resemble a high-speed consumer electronics line instead of an automotive assembly line.

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Tesla FSD gets first rave reviews from media outlets in Japan

As per the publication, FSD demonstrated excellent situational awareness and smooth control, at times even performing better than a human driver.

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Credit: @BLKMDL3/X

Tesla FSD may continue to get flak from mainstream media outlets in the United States, but in other countries such as Japan, Full Self-Driving is being welcomed with much appreciation.

This is, at least, as per recent reviews from domestic media outlets that have tried out the capabilities of FSD on real-world roads.

FSD gets recognition

FSD was recently reviewed by Japanese news outlet Nikkei, which experienced the system’s capabilities in Tokyo’s metropolitan area. As per the publication, FSD demonstrated excellent situational awareness and smooth control, at times even performing better than a human driver. FSD was also credited for properly reacting to sudden, unexpected things on the road.

As per the FSD review, for example, a bicyclist suddenly came barreling into a crosswalk at high speed from the Tesla’s blind spot. The vehicle recognized the cyclist immediately and responded in a safe and proper manner, prompting the reviewer to exclaim “Wow!” And when a vehicle ahead of the Tesla started backing up to perform a turnaround on a narrow street unexpectedly, FSD smoothly halted to avoid a collision. Overall, the reviewer noted that during the 30-minute drive, the Tesla Model 3 running FSD did not require a single intervention. 

FSD’s impending Japan rollout

FSD is not yet rolled out in Japan, but the country seems to be paving the way for FSD to be released in the country. Just recently, reports emerged stating that Japan’s Land, Infrastructure, Transport and Tourism Ministry has allowed artificial intelligence-powered vehicles to be retrofitted with a software update that could enable the activation of their self-driving features.

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In a post on X, Tesla Board Member Hiro Mizuno noted that this decision is no small matter as it could pave the way for a smooth rollout of features like FSD to Tesla consumers in Japan. “The Ministry of Land, Infrastructure, Transport and Tourism’s decision to allow retrofitting of autonomous driving through software updates is significant. Currently, Tesla is the only manufacturer actively pursuing this… this decision will make it easier for all manufacturers to introduce autonomous driving in Japan,” the former Tesla Board member wrote in his post.

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