In the first quarter of 2024, the global decline in EV sales resulted in Tesla producing more cars than it could deliver, leading to the accumulation of its largest-ever stockpile of vehicles. This decrease in deliveries marked the first time Tesla experienced a downturn since 2020, prompting the manufacturer to slash prices in order to move excess Model Y inventory.
To entice buyers to choose from existing inventory rather than ordering a new car, Tesla is offering discounts of up to $7,500 on certain model variants. According to Bloomberg, a Tesla Model Y Rear-Wheel Drive from inventory can be purchased for up to $4,600 less than ordering a new one. The discount increases to over $5,000 for the Model Y Long Range and Performance models.
Tesla’s competitors are starting to catch up
While Tesla previously had no trouble selling all its produced vehicles due to offering the best and most compelling EVs, other automakers now have strong electric models on the market. As a result, buyers are no longer overwhelmingly choosing Tesla.
Reviewing Tesla’s inventory reveals discounted prices, with the cheapest new Model Y Rear-Wheel Drive priced at $41,390, down $3,600 from its original sticker price of $44,990. When factoring in the $7,500 federal tax credit, the price drops to $33,890.
Similarly, with a $5,000 discount, the cheapest Model Y Long Range costs $44,990, reduced to $37,490 after the federal tax credit. The Model Y Performance models are seeing even larger discounts, with the cheapest one priced at $48,140, $5,350 lower than the full list price of $53,490, dropping further to $40,640 with the federal tax credit.
In Q1 2024, Tesla produced 433,371 EVs, but only delivered 386,810, leaving the manufacturer with 46,561 unsold cars, predominantly Model Ys. These excess vehicles need to be sold quickly to maintain production rates at Tesla’s factories.
Known for sudden price discounts, Tesla’s strategy has raised concerns among pre-discount buyers and affected the resale value of their vehicles. Price fluctuations impact buyer confidence, and now there are more EV options from competing automakers, posing a challenge to Tesla’s market dominance.
As demand for the Model 3 and Y begins to dwindle, Tesla anticipates lower sales growth in 2024. The company is focusing on its upcoming $25,000 model, expected to be unveiled by the year’s end and enter production in 2025. This new Tesla model will introduce innovative production methods to enhance efficiency and reduce costs and resource usage.