Tesla Cuts Prices Sharply as It Moves to Bolster Demand.

Tesla has slashed the prices of most electric vehicles by up to 20% in the US and Europe to help slow down demand.

Automakers face increasing competition in the global electric vehicle market. They also have to contend with rising interest rates in the US, which is increasing the cost of financing car purchases.

Wedbush analyst Dan Ives said, “I think Tesla recognizes that it’s not the only game in town. Detroit companies are diving deep into EVs.” . “I think the price cut means that Tesla is going on the offensive by tearing down a stopgap.”

Tesla shares plunged in early Friday trading after the price cut was announced, but closed less than 1% lower. The stock has fallen about 70% since November 2021.

The reduction would allow some of Tesla’s lower-priced models to qualify for $7,500 in federal tax credits available beginning January 1 under the Inflation Reduction Act, depending on optional features. Credits are available for electric vehicles priced under $55,000.

Despite its rapid growth over the last decade, Tesla now faces a number of challenges. Among them are concerns that CEO Elon Musk has become too engrossed in his Twitter, the social media platform he founded last year, acquired $44 billion.

Musk sold billions of dollars worth of Tesla stock to fund the Twitter acquisition. The move sent Tesla’s stock price down, and the company has come under fire for laying off most of Twitter’s employees. He also expressed polarizing political views on his social media platforms. It contains several messages that appear to support Russia in its war against Ukraine, damaging his and Tesla’s reputations with some consumers.

Tesla isn’t the only company dealing with declining sales. U.S. car sales fell about 8% last year, dropping below 14 million units, the lowest level since 2011. This is mainly because a shortage of computer chips has prevented manufacturers from producing as many cars as consumers want to buy. In addition, rising borrowing rates have made financing more expensive for customers.

However, according to market researcher Kelly Bluebook, electric car sales have risen 66% to his top 808,619. And as Tesla continues to dominate the segment, several automakers are gaining ground. Ford, Volkswagen, and several other automakers have seen significant increases in EV sales over the past year, offering many models at significantly lower prices than Tesla. Hyundai and its subsidiary Kia have sold more than 43,000 electric vehicles in the US in 2022, up from just a few hundred in 2021.