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Tesla cuts prices

January 18, 2023
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Strategy | Business Models | Tech

Tesla cuts prices

Source: Alex Castro / The Verge


 

Tesla’s cutting pricing smells like panic, not strategy. The company argues that:

At the end of a turbulent year with interruptions to the supply chain, we have achieved a partial normalization of cost inflation, which gives us the confidence to pass this relief onto our customers”, but -20% decrease? Really?!

My impression is that Tesla is going after two rabbits:

  1. Match delivery expectations amid increase competition (last year they delivered +40 YoY vs +50% expected)
  2. Look for an additional revenue stream: by reducing price while still being profitable the company will maintain (or even expand) the  market penetration to maximise higher margin service revenue later.

The real game changers will be the arrival of a real autopilot, if ever. But how long will that be a moat? Until Google, Apple or other companies figure it out. Regardless, it’s worth trying.

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