A year ago, Tesla was riding high with robust demand and a stock price running well over $300. Now, Tesla faces more competition than ever from other electric vehicles, and its stock value has plummeted to barely $100. Tesla’s response is to do something it doesn’t usually do: cut prices. It’s shaving up to 20% off the price of some vehicles, putting them in range of a new federal tax subsidy.

The new prices appeared on Tesla’s US website late on Thursday, breaking with CEO Elon Musk’s previous assurances that discounts and incentives were a thing of the past. Although, he said that before he needed to cash out billions in Tesla stock to cover his $44 billion purchase of Twitter. The former richest person in the world has used his new social network to advance vaccine misinformation and conservative political talking points. Tesla’s allure was always based in part on the cult of Musk, and analysts are increasingly concerned that Musk’s focus on Twitter memes is harming Tesla.

If you head over to Tesla’s site right now, the entry-level Model 3 has dropped from $47,000 to $44,000 ( a 6% drop), and the Model 3 Performance variant has dropped 14% from $63,000 to $54,000. The Model Y crossover has seen an even larger discount from $66,000 to $54,000, a 20% drop. Those discounts bring the Model 3 Performance and Model Y under the cutoff for the new $7,500 federal subsidies, which require hybrid and electric vehicles to be priced lower than $55,000.

Tesla revealed the Cybertruck in 2019, but it hasn’t started production yet. (Image: Tesla)

In the past, Tesla could sell every vehicle it manufactured, and waiting lists could stretch for weeks or even months. The company manufactured 440,000 vehicles in the fourth quarter of 2022, which was 34,000 more than it sold. Now, the only Teslas people have to wait on are the ones the company is still developing. After unveiling the Cybertruck in 2019, the company has delayed production several times. Musk now claims Tesla will begin building the vehicle later in 2023.

Ford, Volkswagen, and other automakers posted large increases in EV sales for 2022, and General Motors is on the verge of releasing electric versions of the Chevrolet Blazer and Silverado. Tesla has also ceded the top EV spot in China to local automaker BYD. Analysts believe that Tesla could see 30-40% drops in earnings per share if the discounted prices remain in place, but perhaps that’s preferable if it can stabilize the brand.

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