It's sad and possibly insidious that the VW id4 gets to be defined as an SUV but the Model Y and Mach E do not. The 3 are the primary North American SUVs and the path to rapid adoption of EVs in the US. The $7,500 credit through March will only help VW and Ford sell more id4s and stripped-down Mach Es at a loss on every one sold. Even with a credit, the VW has a negative software reputation that will drag on sales.
During the same period there will be a mad scramble to get delivery spots for Standard Range 3s and seven seat Ys before the rules change in March, and the credit goes away for the standard range 3 and the seven seat Y credit drops to $3,750.
What is being ignored is the IRA battery/battery pack credits of $35 and $10 respectively per kwh of batteries and packs made in the US. That $45 per kwh amounts to approximately $3,500 credit to Tesla for every long range 3 or Y. (Tesla by a long-ago contract gets all of Giga Nevada's joint Tesla/Panasonic credits.) IF there is any weakness in demand with a recession, Tesla could offer a $5,000 discount on every long range 3 and Y with no loss in gross margin on the cars. The long range 3 would be back in line for a credit and the standard range Y could be tweaked a bit more to get a credit with minimal options. A $60,000ish long range Model Y would be more competitive in a potential recession, especially with the Mach E decent models having no credits. Other Manufacturers do not benefit the same way because I'm sure that their battery manufacturing partners are unlikely to have made the same mistake as Panasonic.
If the SUV definition is resolved in the Model Y's and Mach E's favor all the better for everyone.
All in all, Tesla could be off to a very competitive start in 2023 before even considering reducing gross margins. They will have plenty of financial flexibility to ride out even a deep recession. It's important to remember that consumer tax credits do not help the manufacturer in an era of already high demand. Credits to a manufacturer help both the manufacturer and consumers with potential discounts.
During the same period there will be a mad scramble to get delivery spots for Standard Range 3s and seven seat Ys before the rules change in March, and the credit goes away for the standard range 3 and the seven seat Y credit drops to $3,750.
What is being ignored is the IRA battery/battery pack credits of $35 and $10 respectively per kwh of batteries and packs made in the US. That $45 per kwh amounts to approximately $3,500 credit to Tesla for every long range 3 or Y. (Tesla by a long-ago contract gets all of Giga Nevada's joint Tesla/Panasonic credits.) IF there is any weakness in demand with a recession, Tesla could offer a $5,000 discount on every long range 3 and Y with no loss in gross margin on the cars. The long range 3 would be back in line for a credit and the standard range Y could be tweaked a bit more to get a credit with minimal options. A $60,000ish long range Model Y would be more competitive in a potential recession, especially with the Mach E decent models having no credits. Other Manufacturers do not benefit the same way because I'm sure that their battery manufacturing partners are unlikely to have made the same mistake as Panasonic.
If the SUV definition is resolved in the Model Y's and Mach E's favor all the better for everyone.
All in all, Tesla could be off to a very competitive start in 2023 before even considering reducing gross margins. They will have plenty of financial flexibility to ride out even a deep recession. It's important to remember that consumer tax credits do not help the manufacturer in an era of already high demand. Credits to a manufacturer help both the manufacturer and consumers with potential discounts.
