Pricing strategy for 2023?

[AndrewZ]

Dec 2023 should be another interesting month, the IRA has a provision that in 2024 the credit will be at the 'Point of Sale', I would imagine that those who are about to take delivery in Dec might want to push that to Jan to get the credit upfront vs waiting for tax season.

Yup and after Dec 31 2023, a vehicle is no longer defined as a “new clean vehicle” and is disqualified from the credit entirely if it contains any battery components from China, Russia, North Korea, or Iran, and that’s on top of the domestic or free-trade partner % component and critical mineral requirements.

Who knows what manufacturers are working on right now and how feasible it is, but I’d expect far fewer vehicles to qualify for the credit in 2024.

After Dec 31 2024, a vehicle is additionally no longer defined as a “new clean vehicle” and is disqualified from the credit entirely if it contains any critical battery minerals from China, Russia, North Korea, or Iran on top of the domestic or free-trade partner % requirements increasing.


So a vehicle needs the following to qualify for the full credit in 2024 as a "Point of Sale" discount:

• Zero battery components from China, Russia, North Korea, or Iran.
• 50% of the value of critical battery minerals from the US or a country with a free-trade agreement with the US.
• 60% of the value of battery components from the US or a country with a free-trade agreement with the US.

A vehicle needs the following to qualify for the full credit in 2025:

• Zero battery components from China, Russia, North Korea, or Iran.
• Zero critical battery minerals from China, Russia, North Korea, or Iran.
• 60% of the value of critical battery minerals from the US or a country with a free-trade agreement with the US.
• 60% of the value of battery components from the US or a country with a free-trade agreement with the US.

People are massively over-optimistic about the impact of this legislation in terms of EV discounts, this is designed to bring the supply chain out of China and it will likely take many years.

 

[hmmwv]

It'll be interesting to see how they define "any battery component," there are a lot of subassemblies in the batteries, if you have to drill down to the level of every single diodes and relays, then it's almost impossible to do in the next 11 months.
Moving supply chain is both time consuming and extremely expensive, some manufacturer may simply asses it as not worth it and continue to use imported batteries while discounting the vehicles to partially offset the incentive. But in the end vehicle manufacturing cost will shoot up, probably higher than what inflation brought us, and the $7.5k may end up only saving us $1-2k if MSRP went up to compensate.
I think Tesla has a real shot at it with its vertical integration but the IRA as it stands really doesn't give Tesla much motivation to be compliant, they might as well negotiating a better deal with existing suppliers and discount the vehicles by $5-7k, the end results may work out the same or better.

 

[AndrewZ]

It'll be interesting to see how they define "any battery component," there are a lot of subassemblies in the batteries, if you have to drill down to the level of every single diodes and relays, then it's almost impossible to do in the next 11 months.
Moving supply chain is both time consuming and extremely expensive, some manufacturer may simply asses it as not worth it and continue to use imported batteries while discounting the vehicles to partially offset the incentive. But in the end vehicle manufacturing cost will shoot up, probably higher than what inflation brought us, and the $7.5k may end up only saving us $1-2k if MSRP went up to compensate.
I think Tesla has a real shot at it with its vertical integration but the IRA as it stands really doesn't give Tesla much motivation to be compliant, they might as well negotiating a better deal with existing suppliers and discount the vehicles by $5-7k, the end results may work out the same or better.

In the end I see the IRA mostly as a way of subsidizing the increased cost that will come with moving all this stuff out of China, we can also consider that suppliers will have increased pricing power for components/minerals that comply with the requirements. Now add in the MSRP limits.

Minerals will be a truly monumental undertaking. Take graphite as an example that is hugely important in batteries and makes up a big proportion of them, I've seen numbers suggesting China controls something like 80% of all global battery-grade graphite production and North Korea controls 10%. My work is largely consulting with resource companies in Canada and I've done a few mining projects, it is borderline impossible to get anything out of the ground here these days. A new mining project right now, you're probably looking a decade out from engineering to commissioning and actually getting product.

 

[hmmwv]

Maybe we should swap discussions, IRA compliant related discussion going back to the IRS weighs in on tax rebate, mostly bad news for Model Y thread.

 

[hmmwv]

That doesn’t mean the car itself is any less desirable to potential buyers. They are just being smart about it. Tesla still outsold every other EV, and even BMW itself in the US.

To think people don’t want Teslas is ridiculous. They are like Civics where I live.

Again desirability is different from demand, which is something concrete, people wanting Teslas does not automatically mean they have the intention, needs, and capability to order one. Tesla doesn't have a desirability problem but they may be facing a demand issue.

Yes. But it’s a different world.

Let’s see how bad 1Q23 is.

I agree, the situation is quite different. In China Tesla has some desirability issues, which compounded with the discontinuing of government incentives created a demand issue, Tesla promptly solved it with consecutive price cuts. So over there Tesla has desirability problem but no demand issue at the moment.

As TSLA shareholder I hope Q1 numbers remain strong, but with multiple factories ramping up they've got to be able to move dramatically more cars. With a fully speced out MYLR7 at over $100k out the door (incl. tax & reg) in some parts of the country I just don't see it happening.

 

[Snow Drift]

@hmmwv
Inventory right now is from Tesla cranking out cars in late December. Who knows if they were even eligible for sale before 12/31 considering shipping constraints.

They had 40%+ growth last year. That doesn’t sound like slowing demand. The economy and sentiment can change, so we will see.

 

[tangible1]

Dec 2023 should be another interesting month, the IRA has a provision that in 2024 the credit will be at the 'Point of Sale', I would imagine that those who are about to take delivery in Dec might want to push that to Jan to get the credit upfront vs waiting for tax season.

government doing what it does best - making a cluster

 

[ord3r]

as expected

https://twitter.com/x/status/1613740973342838784

 

[MN-X-Waiting]

as expected

https://twitter.com/x/status/1613740973342838784

Hilarious that now used Model Y on Tesla website costs more than new.

 

[cdub]

Now the question is do I buy new or wait for the used prices to plummet too?

 

[Wahiawahi]

My MVOA on my M3 order still has the higher sales price of $46,990. Will Tesla charge me the new lower price, or do I need to cancel my current order and place a a new order?

 

[ucmndd]

My MVOA on my M3 order still has the higher sales price of $46,990. Will Tesla charge me the new lower price, or do I need to cancel my current order and place a a new order?

It’s been an hour. Give it a minute, boss.

 

[Wahiawahi]

It’s been an hour. Give it a minute, boss.

I might switch my order to a MY…

 

[sunwarriors]

as expected

https://twitter.com/x/status/1613740973342838784

Totally expected this due to simply supply/demand. Cars weren't being sold at old prices and if they want to keep the factories running building them, prices had to go down. Remember that prices were up a lot during the covid shutdown, supply chain issues so Tesla certainly had more room to cut with their higher margins than others. The question now is how big of an impact will it have and will inventory dry up at these prices and how it affects profits.

Consumers, for a purchase that's discretionary in this economy, always had more power I felt than people here gave. Glad to see for the folks with this thinking (they had to cut prices) were right.

Sorry for the folks who missed out that bought at much higher prices since there is the price cut AND the tax credit (if they don't change the SUV rules).

I see 150 MY around my area, I'd assume it has to go down some soon.

 

[hmmwv]

It'll be interesting to see the new MYAWD price, my guess is $49,990.

 

[Mike7564]

don't get those hopes up too high.
demand remains strong, and Tesla will likely offer Model variants to lower price points, with range and feature trade-offs.
They will not discount all that much.

the market as a whole remains resource limited (batteries). that won't get much relief this coming year.

As a reservation holder who punted on the $7.5k because I believed 2023 pricing/features would be more favorable…. Hate to say “I told you so” as I grin at the updated pricing email.

As a shareholder, it obviously sucks and probably doesn’t bode well for the rest of the year.

 

[hmmwv]

I might switch my order to a MY…

My MVPA has already being updated with the new price, yours should too. If you're considering switching make sure you can take delivery by March to guarantee the $7.5k IRA incentive (if you qualify).

 

[fonger]

Well everyone, here's Tesla pricing strategy for 2023. Sux for us recent buyers.

 

[voxel]

Today’s 3/ Y price matches the true value of the cars. The MYLR is a 50s car and not worth $66K.

 

[KonSre]

Today’s 3/ Y price matches the true value of the cars. The MYLR is a 50s car and not worth $66K.

100% agree