Tesla sales recover after sharp price cuts
Tesla sales rose in the final three months of 2023 after the automaker slashed prices and customers rushed to take advantage of tax breaks for electric vehicles — provisions that will be harder to come by in 2024.
Company said Tuesday that it sold 484,000 cars in the fourth quarter, up from 435,000 in the third quarter and 405,000 in the fourth quarter of 2022. For the full year, Tesla sold 1.8 million cars. The gains put Tesla on track to sell more than two million cars by 2024, potentially overtaking established automakers such as Mercedes-Benz and Renault.
The recovery in fourth-quarter sales should help ease investor concerns about whether Tesla can defend its dominance in the electric vehicle market as the company faces increasing competition from traditional automakers.
Over the past year, Tesla has lost market share to rivals such as General Motors, Hyundai, Ford Motor and Volkswagen as they introduced more electric vehicles. Tesla accounts for half of the electric cars sold in the United States. By 2022, Tesla would account for two-thirds of the market.
In China, the largest market for electric cars, Tesla faces stiff competition from BYD and other Chinese automakers. In Europe, Volkswagen and its Audi and Skoda divisions sell more electric vehicles than Tesla, although the Tesla Model Y is by far the best-selling model on the continent, according to data collected by Schmidt Automotive Research.
In the United States, people interested in buying an electric car had a strong incentive to take delivery before the end of the year because of new rules designed to keep China out of the supply chain.
Tesla had warned on its website that the two cheapest versions of its Model 3 sedan would no longer qualify for $7,500 federal tax credits after December 31. The cars are equipped with batteries made in China. Germany and some other European countries have also rolled back subsidies for electric vehicle buyers.
To keep sales up, Tesla lowered prices and offered Model 3s on its website for well under $30,000, taking tax breaks into account. By the end of December, the number of cheaper cars on the website appeared to have decreased, indicating that the strategy was successful. But the price cuts weighed on Tesla’s profits, which fell 44 percent in the third quarter from a year earlier.
Although fewer Teslas will qualify for federal tax benefits in 2024, the company is in a better position than most of its competitors. The Performance version of the Model 3, which includes upgraded wheels and brakes, will apparently continue to qualify for the subsidy, as will all versions of the Model Y SUV. Tesla makes batteries for those cars at a factory in Nevada that partners with Panasonic, allowing it to meet domestic production requirements.
That gives Tesla a significant advantage over competitors like Ford, which has said its Mustang Mach-E SUV will not be eligible for the honor in the new year.
Ford and others rely on manufacturers in China for crucial parts. Ford is building battery factories in the United States, but they won’t start production until 2025.
General Motors is building batteries at a new factory in Ohio, but is struggling to keep the plant operating at full capacity. Initially, only the Chevrolet Bolt will be eligible for credits, GM said in December. The Cadillac Lyriq and the electric Chevrolet Blazer are no longer eligible.
GM has said it is adjusting its supply chain to make these and other vehicles, including electric versions of the Chevrolet Silverado pickup and Equinox SUV, eligible early this year.
Tesla and other car manufacturers can also benefit from lower interest rates in the new year. Investors are betting that the Federal Reserve and other central banks will cut interest rates as inflation cools.