Tesla cuts Model Y, X and S prices in the US and says it’s ending the referral program

Another round of price cuts has shaved $2,000 off the starting prices of Tesla’s Model Y, Model X and Model S for buyers in the United States. The company’s North America branch posted on X about the change to the Model Y on Friday night, at the same time announcing that the company is ditching its referral program benefits in all markets. The current referral program benefits will end after April 30, 2024.

Tesla’s Model Y now starts at $42,990 for the rear-wheel drive base model, $47,990 for the Model Y Long Range, or $51,490 for the Model Y Performance. The base Model S has dropped to $72,990 while the Model S Plaid now starts at $87,990. The Model X starts at $77,990 (base) or $92,990 (Plaid). The changes come during a rocky few weeks for the company, which just issued a recall for Cybertrucks over possible issues with the accelerator pedal, reportedly laid off 10 percent of its employees and reported a decline in deliveries for the first quarter.

Prices for the locally produced Model 3 and Model Y were cut by around 4-6 percent, while the imported Model S and Model X were reduced by as much as 22 percent. The Model S and Model X are not produced in China and are sold in the United States through imports. The Model 3 is offered in two trims in China, the Model Y in three, and all of them see a price drop of RMB 14,000.

Tesla has a factory in Shanghai that produces the Model 3 and Model Y.

The entry-level, rear-wheel-drive Model 3’s latest starting price is RMB 231,900 ($32,030), down RMB 14,000, or 5.69 percent, from the previous price of RMB 245,900. The latest starting price for the dual-motor Model 3 Long Range is RMB 271,900, down RMB 14,000, or 4.9 percent, from RMB 285,900. The entry-level rear-wheel drive Model Y has a new starting price of RMB 249,900, a decrease of RMB 14,000, or 5.31 percent, from RMB 263,900.

The Model Y Long Range has a new starting price of RMB 290,900, down RMB 14,000, or 4.59 percent, from RMB 304,900. The Model Y Performance has a new starting price of RMB 354,900, a decrease of RMB 14,000, or 3.8 percent, from RMB 368,900. In terms of delivery wait times, both variants of the Model 3 have gone from 2-6 weeks previously to 3-6 weeks, and all three variants of the Model Y have remained unchanged at 2-6 weeks.

Both the Model S and Model X are available in China in regular versions and the more expensive and powerful Plaid version. The latest starting price for the regular Model S is RMB 684,900, a decrease of RMB 124,000, or 15.33 percent, from RMB 808,900. The Model S Plaid’s latest starting price is RMB 814,900, down RMB 214,000, or 20.8 percent, from RMB 1,028,900.

The regular Model X starts at RMB 724,900, down RMB 174,000, or 19.36 percent, from RMB 898,900.

The Model X Plaid’s latest starting price is RMB 824,900, down RMB 234,000, or 22.1 percent, from RMB 1,058,900 previously. The current estimated delivery dates in China for all variants of the Model S and Model X are the third quarter of 2024, and they were previously the second quarter. Notably, Tesla recently lowered the prices of the Model Y, Model S, and Model X by $2,000 in the US, but there were no changes to the Model 3 or Cybertruck.

Tesla delivered 386,810 vehicles globally in the first quarter, down 8.53 percent year-on-year and down 20.16 percent from the fourth quarter of 2023. That is the first time since the second quarter of 2020 that the company’s global deliveries have seen a year-on-year decline, and well below analysts’ estimates of 449,080 vehicles. The company sold 132,420 units in China, its second-largest market after the United States, in the first quarter, contributing 34.23 percent of global deliveries.

That is a 3.64 percent decrease year-on-year and a 22.08 percent decrease from the fourth quarter of 2023. In March, Tesla sold 62,398 vehicles in China, up 107.02 percent from 30,141 in February, though down 18.61 percent from 76,663 a year earlier. Its Shanghai plant exported 26,666 vehicles in March, down 11.77 percent from 30,224 in February while up 118.47 percent from 12,206 in the same month last year.

The first model produced at Tesla’s Shanghai plant is the Model 3, with deliveries beginning in January 2020.

Deliveries of the locally produced Model Y start a year later, in January 2021. The Model Y is one of the best-selling models in China, with monthly sales exceeding even many traditional gasoline cars. And after deliveries of the locally-produced Model Y begin, deliveries of the Model 3 drop significantly. For the full year of 2023, the Model Y sold 456,394 units in China, contributing 75.6 percent of Tesla’s full-year sales of 603,664 units in China.

The Model 3 sold 147,270 units in China in 2023, contributing 24.4 percent of Tesla’s annual sales in China. With the rapid development of the electric vehicle (EV) industry in China over the past few years, both the Model 3 and Model Y are facing an increasing number of competitors. Smartphone giant Xiaomi officially launched its first EV model, the SU7, on March 28, the latest in a slew of Model 3 rivals at a lower price.

The Model Y is still selling well in China, but the arrival of more and more competition is threatening its dominance of the crossover segment. Nio’s sub-brand Onvo, codenamed Alps, will launch its first model later this year. Onvo’s first model will compete directly with the Model Y, with bill of materials (BOM) costs about 10 percent cheaper. Tesla began a 10 percent global layoff earlier this month, and the China team has been affected.

In September 2020, Tesla CEO Elon Musk offered new delivery predictions for 2020 at the company’s shareholder’s meeting.

Tesla also detailed a new battery design that the company claims will make its cars cheaper to produce. Tesla expects vehicle deliveries to increase by 30 to 40 percent. Tesla reported deliveries of 367,500 vehicles. The new guidance implies deliveries between 477,750 and 514,500 cars, a range that encompasses Tesla’s previously stated goal to deliver half a million cars in 2020.

In 2019, Tesla had 50% growth, and the company will do pretty well in 2020, probably somewhere between 30 to 40 percent growth, despite a lot of very difficult circumstances. The battery and manufacturing advances Tesla is working on will soon lead to lower prices, which will be vital for getting more electric vehicles on the road. About 3 years from now, Tesla is confident it can make a very compelling $25,000 electric vehicle that is also fully autonomous.

It is not like Tesla’s profitability is crazy high. Tesla’s average profitability for the last four quarters was maybe 1%. It is not like Tesla is minting money. Tesla’s valuation makes it seem like the company is, but it is not. Tesla wants to make the price as competitive as it can without losing money. Tesla’s shares dropped as much as 7% during the presentation, which took place after normal trading hours, and remained lower on the next morning.

During the presentation, Tesla confirmed that it has designed and is producing its own battery cells at a facility in Fremont, as part of its quest to make its cars affordable to a mainstream buyer.

In general, the batteries of a Tesla are the most expensive part of the car. Tesla’s senior vice president of powertrain and energy engineering Drew Baglino described how the company’s new cells “4680” are larger and simpler to make than the “2170″ cylindrical battery cells it purchases from Panasonic and other suppliers today. A Tesla battery pack would require fewer cells with the new shape and design.

Baglino said the larger cells, along with other manufacturing and design changes underway at Tesla, would eventually improve the range of its cars by more than 50%. Near-term, Tesla says it aims to produce 10 gigawatt hours worth of the new battery cells at its pilot plant within a year. It will take about a year to reach the 10 gigawatt hour capacity.

With its new cells, Tesla is also seeking to reduce or completely avoid the use of some expensive materials used in lithium-ion battery production today, including cobalt. If Tesla can make a cheap, reliable battery with little or no cobalt, it will really improve the ability of EVs to scale up. Most cobalt is from the Democratic Republic of Congo and the mining has long generated human rights and child labor concerns.

The advances announced at battery day will not find their way into mass production until 2021, sending Tesla’s stock down about 6% ahead of the event.

Due partly to covid health orders that limit the size of in-person gatherings, Tesla postponed its annual meeting from July to September 22nd 2020. Tesla previously held its shareholder meetings at the Computer History Museum in Mountain View, California but moved the event to the parking lot of its United States vehicle assembly plant in Fremont. Shareholders parked and sat in their cars at the meeting, which Musk characterized as a “drive-in”

They honked in lieu of applause. Those who wanted to attend had to obtain a winning lottery-style ticket to the meeting. Otherwise, shareholders could log into a website to ask questions to be answered during the live-streamed event. The big question will be on follow through. It is one thing to announce all these breakthroughs, which might be great for momentum algorithms, but like most things Tesla, the devil will be in the details, which sadly will take some time to play out.

Shares of Tesla are up more than 400% year-to-date. Musk sent an email to all employees at the company saying it would have to rally hard to hit record deliveries for the quarter. Musk, and sometimes other Tesla execs, typically send everybody emails in the final week of the quarter, many of which leak to the press. Doing this helps encourage employees, internally, and manage investor expectations externally as Tesla approaches its deadline for vehicle production and deliveries.

Like other automakers, Tesla reports these numbers on a quarterly basis ahead of earnings.

Tesla delivered 112,000 vehicles in the fourth quarter of 2019, its best on record, and 88,400 in the first quarter of 2020. In the second quarter of 2020, Tesla delivered 90,650 vehicles, which beat analysts’ expectations given the covid pandemic’s effect on production and demand. Wall Street expects Tesla to report vehicle deliveries of 144,000 for the quarter.

The estimates range from 123,000 to 190,000. In early 2020, Tesla offered guidance that the company would deliver 500,000 electric vehicles in 2020, and it has not changed that number. However, in the company’s filings, Tesla has revised its tone, and stopped saying it would comfortably exceed 500,000 deliveries in 2020. Tesla will hold its annual shareholder meeting and a battery day presentation, where the company is expected to reveal new details about its battery and manufacturing technology.

Overall, Bank of America expects news flow with the event will be positive, but given there is so much hype behind Tesla, it is unlikely to drive a material move in the stock in either direction. Tesla shares closed up 1.6% as the overall market fell. In August 2020, Tesla shares raced to a fresh record high as investors positioned themselves for a five-for-one split of one of Wall Street’s hottest, and most expensive, stocks.

Shareholders of record at the end of the Friday session will receive four additional shares of Tesla stock for each one they currently hold, with the distribution set for August 28th.

At the company’s current price range, the split will likely pull the average cost of the group’s shares to around $400 each as is moves towards a likely inclusion into the S&P 500 later this fall. Stocks that offer their investors a split have historically outperformed the market following the distribution, as investors see the move as a signal of confidence in the company’s longer-term growth prospects. However, Tesla’s recent share price surge could complicate the traditional path forged by tech giants Apple and Google following splits in 2014.

Tesla is already richly valued with its P/E standing at over 200x, based on consensus projected 2020 earnings, meaning that the company will have to execute very well to simply justify its current valuation, let alone drive further stock price gains. On the other hand, Apple’s P/E stood at 14x during its most recent split while Google’s P/E stood at 25x during its first split. Tesla shares were marked 2.7% higher in early trading Friday to change hands at $2,055.00 each, after hitting $2,078.30 earlier in the session, an all-time high that would peg the stock’s year-to-date gain at nearly 400% and value the company at more than $385 billion.

Tesla shares have gained more than 50%, in fact, since the group unveiled plans for its five-for-one stock split on August 11th that would make its equity more accessible to investors as it prepares to enter the S&P 500 benchmark. The S&P 500 inclusion could trigger even more activity in the company stock, with significant incremental buying of around 18 million shares from passive investors and fund managers that track the benchmark index. Tesla cleared its final hurdle towards its inclusion on the benchmark after it published its fourth consecutive quarterly profit last month, helped in part by the sale of government emissions credits.

Tesla’s GAAP earnings for the three months ending in June were pegged at 50 cents per share, compared to a loss of $2.31 per share over the same period last year, on revenues of $6.04 billion.

The quarterly profit, the company’s fourth in succession, clears one of the final hurdles for the company to be included on the S&P 500 benchmark. Tesla also confirmed its full-year vehicle delivery target of 500,000, despite a first half tally of 179,050 units. Tesla, which assumed the mantle of the world’s most-valuable carmaker in July despite its modest contribution to total global sales, will sell, at most, 500,00 cars this year.

Ford, which has a market value that is 14 times less, will likely shift 2.2 million vehicles and Toyota, with a market value of $220 billion, will sell 10.7 million vehicles.