Tesla has cut its prices in half over the last five years, according to a recent article published by Electrek. Those price cuts are making the most popular US EV maker’s models more affordable for the masses, but Tesla’s not quite there yet. Perhaps it can reduce those prices by half yet again, and sooner rather than later.
If you read the words of CEO Elon Musk, and Tesla’s mission in general, you’ll learn that the company’s goal is to convert the masses to EVs. While Tesla has made it very clear that it’s just fine if those EVs are made by rival brands, it has clearly been working diligently to grab up as much of that market share as possible for itself.
Tesla isn’t a luxury brand, and it has never pretended to be. It calls its cars premium since they’re arguably nicer than the typical non-luxury car, though they’re nowhere near as nice as an Audi, Mercedes, or BMW.
That said, Tesla’s vehicles aren’t cheap, so they’ve been lumped into the luxury category for years. While luxury automakers don’t tend to sell a massive number of vehicles – they’re not intended for the mainstream – Tesla has been a notable exception. People seem willing to pay for the brand and the technology more than they’re willing to pay for a “normal” luxury car over its non-luxury cousins.
As the average transaction price for a new car soars to nearly $50,000, some of Tesla’s EVs no longer seem so pricey, especially after the recent price cuts, and considering the money you’re likely to save on fuel costs and maintenance. Tesla’s prices now undercut the price of most luxury cars, as well as competing EVs produced by luxury automakers.
It doesn’t take a ton of research to realize that the prices for at least some of Tesla’s vehicles are more in line with successful non-luxury rivals, such as the Ford Mustang Mach-E and Kia EV6. Moreover, while the latter two models are not luxury crossovers, their design is much more premium than that of a typical car, which is arguably the case with Tesla’s models.
We can’t say for sure that Tesla had this all planned, but it certainly appears that with the prices of Model 3 and Model Y, Tesla is moving into the mainstream EV space. It comes as no surprise if this is the direction Tesla is headed since its goal is to sell EVs to the masses, and a typical luxury automaker wouldn’t likely realize such a goal.
As Electrek points out, Tesla’s prices have dropped notably over the years. To put things in perspective, the publication included the following slide from Tesla’s earnings:
Sure, Tesla’s prices went up last year, and they’re at a low point right now. They’re almost certainly going to continue to fluctuate for years to come. However, the average new car transaction price is going up as automakers continue to bring pricey EVs to market, and Tesla is now dropping its prices and still benefitting from what appear to be the best margins in the business.
As Tesla moves forward, the goal is to produce a new platform to make even more affordable cars, which will seemingly be mainstream EVs for the masses. If the relatively expensive Model 3 and Model Y can take the world by storm and become EVs for the masses, one can only assume that a new platform for producing electric cars at half the cost of Tesla’s current entry-level vehicles would appeal to an exponentially more massive audience.
Elon Musk mentioned the potential new platform back in November 2022. Tesla already confirmed in January 2023 that the platform is under development, and we recently learned that Tesla will talk about it at its upcoming Investor Day, on March 1, 2023. We also know that Tesla China plans to design and produce a ~$25,000 Tesla EV for global consumption.
What are your thoughts on all of this? We’d love to read what people have to say about Tesla’s potential future as a mainstream automaker cranking out much more affordable options.