Why Tesla Took The Lead In Cutting Prices — Elon Musk Explains

Tesla Inc TSLA CEO Elon Musk on Tuesday explained why it started the price cut war in the EV market and not any other automaker.

What Happened: “Other carmakers have a delayed reaction to the market, as they ship to dealers, rather than selling direct,” Musk wrote on X, formerly Twitter. The CEO was responding to alleged reports of Mercedes Benz increasing discounts on some vehicles.

Tesla has a direct sales style of functioning which means it sells directly to customers without using third-party dealerships. According to Musk, this provides the company with the ability to react to market sentiment quickly without awaiting delayed feedback from dealerships.

Why It Matters: Tesla started cutting prices across its key markets at the onset of this year. Other EV makers followed suit to keep up with the competition, paving the road for an intense price war. Though the Musk-led EV giant has also increased prices intermittently, the vehicles remain cheaper than before the company commenced cutting prices.

During the company’s latest earnings call in October, Musk expressed concerns about falling demand as rising interest rates make EVs more expensive for the consumer.

With rising interest rates, the monthly payments customers pay for the cars haven't really changed despite price cuts, Musk said.

"When you look at the cost or the price reductions we’ve made in, say, the Model Y and you compare that to how much people’s monthly payment has risen due to interest rates, the price of the Model Y is almost unchanged," Musk said.

Photo Courtesy: Shutterstock.com

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