By radically reducing the prices of its Model 3 and Model Y, Tesla has completely reshuffled the cards in the field of the electric car. These two models were already recommendable, but are really becoming essential. Should I buy them now or wait? Here are some answers.
Tesla and price cuts, we know. When it was released in France, the Tesla Model 3 in the Standard Range+ version (now called Propulsion) was sold for around 50,000 euros. At the very beginning of 2021, the Texan manufacturer has severely reduced the selling price of the entry-level version to less than 45,000 euros. With the bonus threshold effects, we went to a final price of 36,800 euros and a drop of more than 10,000 euros.
An increase of 17,000 euros in a few months
The party lasted more than a year, before the price goes uppreventing Elon Musk’s car from being eligible for the maximum ecological bonus. The car saw many price increases throughout 2022, finally settling at 53,490 euros. With the new bonus 2023, the car cost almost 17,000 euros more. Most potential customers therefore forsook the Model 3 to order a Tesla Model Y Propulsionless expensive, because sold for 49,990 euros and launched since September 2022.
The lower price of the Model Y Propulsion in France was an anomaly that we had revealed many times. We expected to a price adjustment, which would allow the Model Y to be sold more expensive than the Model 3 eventually. But we did not expect this price drop for Tesla’s two electric cars. And especially not at such a huge drop!
Elon Musk promised last summer that the price of Tesla might go down when inflation goes down. All the signs therefore suggested that Tesla was going to raise the price of the Model Y Propulsion following a few months, to put it back in front of the Model 3 Propulsion. Since this week’s price drops, the Model 3 is now sold cheaper than the Model Y, but not via price increases for the SUV. Excellent news for potential customers of the Texan manufacturer.
The big question we can ask ourselves is: should we rush to the Tesla Model 3 and Model Y with this new price drop, or should we still wait? In other words, are the new prices the deal of the year?
Let’s take the problem point by point to try to answer this delicate question.
Price uncertainty for the coming months
The first argument that makes us say to rush into a Tesla showroom if you want to buy a Model 3 or Model Y, is the certainty that Elon Musk’s electric cars can hardly be cheaper . Far be it from us to announce that Tesla is selling at a loss with these prices, but they seem really very low to us.
Especially since, unlike 2021, the price of Tesla has dropped all over the world: in China, in Europe, but also in the United States. Across the Atlantic, the Model S et Model X have also seen their prices drop this week.
So yes, Tesla’s operating margin is huge. It is the manufacturer who earns the most money from the sale of his carscompared to other mainstream manufacturers. In China, in Q3 2022, Tesla earned $9,711 per car sold, compared to $7,469 for Mercedes and $5,949 for General Motors. The difference is huge as the Asian media chart shows IT Home.
Looking at global figures, Tesla sold 343,830 electric cars over the same period, for a profit of $4,968 million. That is a profit of more than 14,000 euros per car sold. Tesla can therefore afford to lower prices, but with reductions ranging from 3,000 to 11,000 euros in France, and similar amounts in China and the United States, the margin will inevitably shrink in the coming months. to come.
So the big question is whether Tesla can afford to maintain these prices for a long time, or if it’s fair. a way to clear inventory and increase demandto allow factories to run at full capacity.
A price drop to fill the order book?
let’s remember that Tesla is currently experiencing difficult issues in terms of inventory and demand. This is the first time that the American company has so much stock on hand. It is for this reason that we have been able to see many discounts and gifts all over the world at the end of 2022 to try to sell everything before December 31, in order to look good with investors.
On the demand side, the various price cuts in China during the second half of 2022 have raised many concerns among analysts in the automotive industry. Delivery times in China have been reduced over timeas if Tesla had too many electric cars to sell.
So much so that the vice president of Tesla China had to speak up to deny his rumors. During the very recent price drop in France, Tesla made the same speech. In essence, the manufacturer justifies this price drop by optimizing production and logistics, and by a calmer period (the end of COVID, the war in Ukraine stabilized, the semiconductor crisis which is less violent, etc.). Enough to allow, according to Tesla, to see the future more serenely, and to adapt prices accordingly.
If Tesla lowers prices to increase demand, and therefore production at its factories, the risk is that car prices will rise once more when factories run at full capacity and struggle to meet demand. This situation is not unthinkable, since it has already taken place in the last few months, when some models claimed more than 12 months following the order before being produced and then delivered.
The evolution of the ecological bonus
We must not forget that in France, the prices of Model 3 Propulsion and Model Y Propulsion are really very low compared to other markets, thanks to the mechanism of the ecological bonus. And we do not know how this will evolve in 2023. It is possible that it will be reduced for the wealthiest households. Will this happen in 2023 or rather in 2024? Impossible to predict.
If in addition you can benefit from the conversion bonus (scrap bonus), then the rates are even more affordable. Admittedly, higher than the average sale value of a car in France (around 25,000 euros), but much cheaper than equivalent electric cars.
In other words, currently, the Tesla Model 3 Propulsion and Model Y Propulsion benefit best value for money in the automotive industry. The competition must surely not welcome this price drop with enthusiasm.
Can Teslas cost even less?
It’s unclear whether Tesla will raise Model 3 and Model Y prices in the coming months. But it is likely. If it did, it wouldn’t be immediately, but when the Gigafactories around the world are saturated. Which will take some time. Especially since the production capacities are mind-blowing: approximately 1.6 million cars per year if we take into account la production du 4e trimestre 2022but potentially 2.5 million with all factories at full capacity.
The big question is therefore whether Tesla can further reduce its prices, despite the current inflation and the rise in the price of raw materials, and in particular lithium necessary for the manufacture of batteries.
As we saw above, this possibility should be ruled out in the short term, at the risk of Tesla selling at a loss, or reducing its innovation capabilities too much. The American company needs cash for its expansion and particularly to bring new factories out of the ground.
If Elon Musk’s firm is currently the leader in the electric car industry, ahead of the Chinese giant BYD (which catches up dangerously), it is still ahead of traditional players such as Volkswagen. But the latter are investing massively, with production capacities (all engines combined) of several million vehicles per year for each.
Anyway, it is certain that with its prices, the Tesla Model 3 and Model Y will be a hit, in France, Europe, the United States and China. Elon Musk’s goal of making the Model Y the best-selling car in the world by 2023 is no pipe dream. It is highly likely. Which would make it the first electric car to hold this title.
Should you buy a Tesla Model 3 or Model Y now?
You will have understood this when reading this file. If you are currently looking for an electric car and you’re eyeing a Model 3 or a Model Y, now’s the time to get down to business.
Indeed, it is almost certain that the prices of these two models will not decrease in the coming months. There’s no reason, unless the competition matches those rates. But this is impossible, since competitors have much less room for manoeuvre. And, on the contrary, they gradually increase the price of their vehicles.
Conversely, there are chances that the price of Model 3 and Model Y will increase in the future. The question that remains unanswered is: when?
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