Recently, Tesla launched the fifth price cut in 2023 in the United States, which has aroused widespread concern from the outside world. Some people think that Tesla is launching a price war between electric vehicles and internal combustion engine vehicles, while others wonder why Tesla cut prices when the market demand is strong.
In response, Elon Musk responded on Twitter. “We’re not ‘starting a price war,'” he said. “We’re just lowering prices to achieve affordability at scale.” More people can afford electric vehicles.
Tesla’s price cuts are amazing. Take Model Y as an example. The price of this car will drop by 24% in 2023, from $54,000 to $41,000. That’s very rare in the auto industry, which typically raises prices gradually after new cars hit the market to preserve profit margins. Tesla, on the other hand, has done the opposite, constantly reducing costs and prices, even making the price of Model Y lower than the average price of a new car in the United States ($46,000), and can also enjoy tax incentives provided by the federal government.
Why is Tesla doing this? Some analysts believe that Tesla does not rely on traditional media advertising to promote its products, but uses social media and word of mouth to attract consumers. Tesla and Elon Musk themselves have hundreds of millions of fans on Twitter, and they attract attention by posting the latest product information and technological progress. As a result, Tesla can save a lot of money on advertising and use that money to lower prices.
But more importantly, Tesla sees itself not just as an automaker, but as a software company. Tesla’s biggest bet is its Full Self-Driving (FSD) software. If this software can be successful, and it is recognized and supported by the government and society, then Tesla will have a large and stable revenue stream. So Tesla wants to be able to build and sell more cars and connect them to its network.