As the year comes to a close, Tesla is making a final push to meet Wall Street expectations for a record-breaking quarter. With higher interest rates and increased competition in the electric vehicle (EV) market, selling nearly half a million cars won’t be an easy task. However, instead of resorting to price cuts, Tesla has opted for a new tool to boost sales: incentives.
Tesla is currently offering attractive incentives on its inventory of vehicles. Buyers can enjoy discounts of almost $4,000 on select Model Y vehicles, in addition to receiving six months of free supercharging. The value of the charging benefit can amount to approximately $900 or more, depending on the driver’s usage of the free charging service.
In fact, total incentives on Tesla vehicles can constitute over 8% of the transaction price. This is higher than the average incentive provided on new car sales in the US in October, which stood at around 5% of the transaction price according to automotive data provider Kelly Blue Book.
It’s important to note, however, that Tesla’s average incentive levels would actually be lower than 8%. This is because most Tesla vehicles are custom ordered with specific configurations through the company’s website.
Incentives in the US auto industry have been gradually increasing over the past few months. They remained at historically low levels, averaging less than 3% of transaction prices for much of 2022. This was significantly lower compared to October 2022, when incentives accounted for about 9% of the average transaction price.
At present, Tesla is offering incentives across their entire lineup of vehicles. In some cases, incentives on certain Model 3 vehicles can amount to nearly 10% of the vehicle’s price, including the added advantage of free charging benefits. Additionally, Tesla has extended a special offer to Cybertruck reservation holders, providing them with a $1,000 discount on Model S and X vehicles.
It is worth mentioning that while some Cybertruck orders may not be delivered until 2025, reservation holders have the option to consider other vehicle models in the meantime.
Tesla Aims for Record Quarter in Vehicle Deliveries
Tesla, the renowned electric vehicle manufacturer, is working towards a strong comeback in the fourth quarter as it seeks to surpass its previous delivery numbers. In the third quarter, Tesla delivered approximately 435,000 vehicles, slightly lower than the second quarter’s delivery of about 466,000 units. However, Wall Street analysts are anticipating a new record of around 475,000 units for the fourth quarter.
The disappointing delivery results in the fourth quarter of 2022, when Tesla delivered roughly 405,000 units instead of the projected 420,000 units, had a significant impact on the company’s stock. On the first trading day of 2023, Tesla’s stock plummeted by more than 12%. This decline was compounded by the subsequent price cuts initiated by Tesla and signaling a concerning trend in slowing deliveries.
One particular model affected by the price adjustments was the performance version of the Model Y. Late in 2022, it had a starting price of approximately $63,000. However, it has now been reduced to about $52,500, making it more accessible to potential buyers.
Despite the challenging market conditions brought about by the price cuts, Tesla’s stock managed to bounce back. At the beginning of 2023, shares were valued at around $123 each. However, following the disappointing delivery results and subsequent price cuts, the stock dropped to nearly $100 per share. Currently, shares are trading at almost $244 per share, reflecting an impressive growth rate of over 100% from the lows experienced in 2023. This remarkable performance raises expectations for the upcoming fourth-quarter delivery figures, typically reported on Jan. 2.
Investors will undoubtedly closely scrutinize the delivery numbers and assess the impact of higher incentives on Tesla’s profit margins. In the third quarter, Tesla’s operating profit margins were 7.6%, representing a decline of almost 10 percentage points compared to the previous year. Analysts anticipate that operating profit margins in the fourth quarter will hover around 9%. Achieving this target while simultaneously dealing with rising incentives will pose yet another challenge for Tesla.
Ultimately, Tesla’s ability to deliver impressive results in the final quarter remains uncertain, and investors await the forthcoming delivery figures and subsequent evaluation of profit margins. However, with the stock exhibiting robust performance in recent times, all eyes are on Tesla as it strives for a record-breaking quarter.
