Posted on July 12, 2023
Electric vehicles (EVs) accounted for 7% of new car registrations from January through May this year, up from 4.6% during the same period in 2022, according to Experian. The Tesla Model Y SUV played a significant role in this growth, with its new registrations soaring by 103%. Conversely, registrations for Tesla’s more expensive models, the Model X and Model S, only increased by 7% and decreased by a dramatic 59%, respectively.
Last quarter, the Model Y became the world’s best-selling vehicle, largely due to increased sales in China. Tesla has strategically reduced prices on both the Model 3 and Model Y multiple times this year, leading to a price-cutting war in the EV market. Both models now qualify for a $7,500 tax rebate, providing further incentive for potential buyers. As a result of these price cuts, average EV prices have decreased by 20% in the past year, from $66,390 in June 2022 to $53,438 in June 2023.
These price cuts indicate a major strategic shift for Tesla. While each sale might be less profitable than in the past, the company aims to sell as many cars as possible, anticipating greater future profitability from software downloads. CEO Elon Musk has highlighted the long-term goal of shifting towards higher volumes and a larger fleet versus lower volumes with higher margins.
Tesla has always been innovative in finding alternative revenue sources. In its early years, the company was able to grow by selling regulatory credits to other automakers. More recently, Tesla's charging plug has been adopted by other automakers for their future EVs, and Tesla has agreed to open its Supercharger network to these other brands' EVs. According to estimates from Piper Sandler & Co., this could potentially increase Tesla's annual charging revenue to $3 billion by 2030 and $5.2 billion by 2032.
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