By Hyunjoo Jin
Analysts said that Tesla, facing economic headwinds as well as increasing competition, has cut prices aggressively in several regions this year and has resorted to the traditional tactic of automakers offering incentives to clear their inventory.
Elon Musk, Tesla's CEO, announced to shareholders on Tuesday that the company will begin advertising. Analysts believe this could increase demand. Musk warned that Tesla is not immune from the global economic climate, and predicted it would be tough for the next year.
Tesla raised the prices of new models in the U.S. twice this month, but the prices are still much lower than before the price reductions began this year.
According to its website, Tesla offers discounts up to $1,300 for some Model 3s, compared with the $250 discount offered earlier in the month on certain Model Y and Model 3 models. The $250 Model Y discount is no longer available as of Friday.
Model 3 starts at $40,240 in the U.S. and Model Y is $47,490.
Ivan Drury is the director of Insight at Edmunds.com. He said that Tesla's incentives are a sign that the company has started to oversupply the marketplace.
Tesla will launch a redesigned version of its Model 3 sedan in this year, to refresh its outdated product line. Last month, Ford Motor Co CEO Jim Farley stated that the price reductions to increase sales volumes reflect the pressures Tesla faces due to competition and an ageing product lineup.
DEEP DISCOUNTS IN EUROPE This month, Tesla has offered deep discounts to European customers as well. The reason for this is that production in China and Berlin factories outpaced the demand.
Tesla Info's global inventory list shows that the company offers discounts up to 3,490 euro ($3,841.79) on a Model 3 made in China and 3,660 euro ($4,028.93), for a Model Y made in Berlin. Similar discounts are available in other markets, including France, Germany and the United Kingdom.
Tesla researcher Troy Teslike tweets on Friday that Tesla has solved its inventory problems in China by importing from this market.
The problem is that cars exported to Europe end up as inventory, which is at an all-time record high. He said that Europe now has a problem with inventory, but China does not.
Musk, at the shareholder's meeting, said that Tesla's approach was straightforward. Tesla has not responded to Reuters request for comment.
He said, 'We look at the demand and adjust the price to match it.'
Tesla's global inventory was 15 days in the first quarter. This is lower than the average for the industry, but it was the highest since nearly three years. In the United States, inventory is typically 35 days. Tesla produced more cars than they sold. Analysts said that this forced the company, which does not have dealers, to absorb excess stock.
Tyson Jominy is a consultant with J.D. Power. ($1 = 0.9084 euro)
Reporting by Hyunjoo Ji in San Francisco