Tesla cuts Model 3, Y prices in the U.S. to boost delivery targets

Oct 5 (Reuters) – Tesla Inc (TSLA.O) cut U.S. prices for its Model 3 compact sedan and Model Y SUV after third-quarter deliveries from the world’s most valuable automaker fell short of market expectations. A few days later, its price war intensified.

The latest cuts come as the company strives to deliver a record 476,000 vehicles in the final three months of 2023 to meet its annual target of delivering 1.8 million vehicles.

Tesla began cutting prices in January, now by about 2.7% to 4.2%, to support sales amid economic uncertainty and fend off competition from U.S. automakers such as Ford and China’s BYD.

Tesla shares fell 2.1% on overall market weakness and concerns that interest rate cuts would further erode the company’s industry-leading profit margins, which fell to their lowest in nearly four years in the April-June quarter.

The automaker’s website shows that the standard Model 3 sedan is now $1,250 cheaper at $38,990, while the Model Y Long Range is $2,000 cheaper at $48,490.

Tesla has also lowered prices on higher-priced versions of both models.

Overall, the price of the standard Model 3 has dropped by about 17% since the beginning of this year, while the price of the Model Y Long Range Edition has dropped by more than 26%.

The price cuts would also put more pressure on the Detroit Three as they deal with an unprecedented strike by the auto workers union.

Any new contracts with unions are expected to cause costs to soar, benefiting non-union automakers such as Tesla and Japan’s Toyota.

Tesla is scheduled to announce its third-quarter earnings on October 18.

Analysts polled by Visible Alpha expect the company’s auto gross margin for the quarter to be 19.1%, a sharp drop from last year’s record profit margin of more than 32% in the first quarter.

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