Tesla's profits could come under further pressure

Tesla has just cut the price of electric cars in the US, causing the company's profits to shrink further in the context of declining global demand.

American electric car company Tesla announced on its website on February 10 that it will temporarily reduce the prices of some Model Y models in the US until February 29. Accordingly, the Model Y RWD and Model Y Long Range cars will be reduced by $1,000, down to $42,990 and $47,990, equivalent to a reduction of 2.3% and 2%.

Prices for other versions of the Model Y and other vehicles remain the same, though Tesla added that prices could increase by $1,000 or more starting March 1.

Model Y cars at the opening ceremony of Tesla's factory in Germany in March 2022. Photo: Reuters

Last month, Tesla cut prices on its Model Y vehicles in Germany after it had to halt most production at the plant due to a shortage of parts as tensions in the Red Sea disrupted shipping.

Tesla warned in January that its revenue growth this year could “decline significantly” as it focuses on building its next-generation electric vehicle. The price cuts could further squeeze Tesla’s profit margins, which were already being hit by a price war it launched early last year.

Tesla's fourth-quarter 2023 revenue and profit both missed analysts' expectations. Tesla shares have fallen 22.1% since the beginning of the year.

Global demand for electric vehicles is shrinking. Competition is also growing as cheaper electric vehicles emerge, such as BYD, which surpassed Tesla in global electric vehicle sales in the last quarter of 2023.

In another sign of slowing demand for electric vehicles, last month Hertz Global Holdings, the leading US car rental company, announced it would sell 20,000 electric vehicles, including Teslas, over the next two years, citing high costs associated with crashes, damage and depreciation.

Ha Thu (according to Reuters)

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