Tesla has decided to eliminate discounts on its entire vehicle inventory, including popular models like the Model 3, Model Y, Model S, and Model X.
This move is part of a broader initiative by CEO Elon Musk to make the company’s sales and delivery processes more efficient, which he described on the social media platform X as “complex and inefficient.“
Elon Musk’s decision to streamline operations was disclosed through a post on X, responding to a user’s comment just a day after Tesla announced substantial layoffs, affecting over 10% of its workforce, approximately 14,000 employees. This reduction in workforce is attributed to the company’s unsatisfactory financial performance. The layoffs and a notable hiring freeze are evident from Tesla’s North American careers page, which now lists very few job opportunities.
These corporate changes coincide with the departure of two high-profile executives; Rohan Patel, the former Vice President of Public Policy and Business Development, and Drew Baglino, the former Senior Vice President of Powertrain and Energy, both left the company citing significant organizational changes.
How Has Tesla’s Pricing Strategy Changed Over the Years?
The cessation of inventory discounts marks a sharp turn from Tesla’s previous pricing strategy. In the past, Tesla fluctuated between raising prices throughout 2022 and then slashing them in 2023, sometimes by as much as 20% on some models. Just earlier this year, Tesla reduced prices significantly, including a $5,000 cut on several long-range and performance Model Y vehicles and over $7,000 on rear-wheel drive versions.
In addition to these pricing adjustments, Tesla also reduced the monthly subscription cost for its Supervised Full Self-Driving software from $199 to $99. Despite these efforts, which boosted sales to a record 1.8 million vehicles in 2023, Tesla has seen a contraction in profit margins and a decline in deliveries in the first quarter of 2024. The company also noted that it has been producing more vehicles than it delivers, a trend persisting for seven of the last eight quarters.
Tesla had previously signaled a cautious outlook for 2024, indicating that sales growth might be significantly lower as it shifts focus towards launching new initiatives such as a robotaxi service, diverting from earlier plans for a $25,000 EV model.
The exact role of ending discounts in Tesla’s strategy to streamline its sales and delivery system remains unclear.
The company has long been known for its direct-sales model, bypassing traditional dealership networks—a strategy that has involved numerous legal battles to establish and maintain. This model has seen various adjustments over the years.
For instance, in 2018, Musk announced the acquisition of trucking companies to manage logistics better, followed by a controversial decision in early 2019 to close several retail stores to cut costs—a decision that was reversed shortly thereafter.
More recently, in late 2022, Tesla acknowledged difficulties with its end-of-quarter delivery rushes and declared intentions to smooth out these processes. However, challenges with these quarterly bottlenecks continue to be a part of Tesla’s operational struggles.
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Featured Image courtesy of Aly Song/REUTERS