Tesla's profits could come under further pressure

Tesla has just reduced the price of electric cars in the US, causing its profits to shrink even more in the context of declining world demand.

American electric car company Tesla announced on its website on February 10 that it will temporarily reduce the price of some Model Y models in the US until February 29. Accordingly, Model Y RWD and Model Y Long Range cars are reduced by 1,000 USD, to 42,990 USD and 47,990 USD, equivalent to a decrease of 2.3% and 2%.

Prices for other versions of Model Y and other car models remain the same. However, Tesla also added that the price could increase by $1,000 or more from March 1.

Model Y car at the opening ceremony of the Tesla factory in Germany in March 2022. Photo: Reuters

Last month, Tesla slashed prices on Model Y vehicles in Germany. This happened after they had to stop most production activities at this factory, due to a lack of components when tensions in the Red Sea caused disruption to shipping.

In January, Tesla warned that revenue growth this year could "decline significantly", as they are focusing on producing the next generation electric car model. The price cuts could further pressure Tesla's profit margins. This company's profits were already affected by the price war they launched early last year.

Tesla's fourth quarter 2023 revenue and profit did not meet analysts' expectations. Since the beginning of the year, Tesla shares have fallen 22.1%.

World demand for electric vehicles is shrinking. Competition is also increasing because of the emergence of many low-cost electric vehicles, such as BYD. The Chinese company surpassed Tesla in the number of electric cars sold globally in the last quarter of 2023.

Another sign that demand for electric cars is decreasing is that last month, the leading car rental company in the US Hertz Global Holdings announced that it will sell 20,000 electric cars, including Tesla, within the next 2 years. The reason is high costs related to impact, damage and depreciation.