Tesla Has New Deals on Its Model Y. Investors Might Not Love That.

What’s good for
Tesla
car buyers might not be good for Tesla shareholders.

Investors will have to digest another pricing action from the electric-vehicle leader on Wednesday before the Thanksgiving holiday.

Tesla’s (ticker: TSLA) U.S. website now shows discounts of almost $3,000 for some Model Y EVs in its inventory. A long-range Y that lists for $56,490 can now be purchased for $53,670. Other discounts are available, too.

How many cars are affected isn’t known. Tesla didn’t immediately respond to a request for comment.

The incentives might be hitting the stock. Tesla shares were down 3.4% in midday trading while the
S&P 500
and
Nasdaq Composite
were up 0.4% and 0.5%, respectively.

Price cuts and discounts amid slowing EV demand and more EV competition have been themes for investors in 2023. Some versions of the Model Y are $17,000 less expensive than they were in 2022.

Lower prices have hurt Tesla’s profit margins. Operating-profit margins in the third quarter of 2023 came in below 8%, down from 17% a year ago as the average price realized for a vehicle fell roughly $10,000 to $44,000.

Price cuts have helped volume, though. Tesla delivered some 1.3 million units in the first nine months of 2023, up from roughly 900,000 in the year-ago period.

Investors have had some reason to hope the cycle of price cuts will end. Recently prices for some versions of the Model Y went up by $500. The incentives do not completely undo the hope. Discounts aren’t exactly price cuts. Dealers have always used incentives to move cars off the lot and Tesla is the dealer along with being the auto maker. That’s a little different from other auto makers such as
Ford Motor
(F) which sells through an independent dealer network.

What’s more, the average transaction price for a Tesla vehicle in the U.S., including any incentives, is rising again. Average transaction prices rose about 5% in October from September, according to Kelly Blue Book data. That’s the first month-over-month increase in 2023.

In October, overall industry incentives amounted to about 5% of the purchase price, up from a year ago but still lower than historical standards, according to the automotive-data provider.

The average price for a new car in October came in at about $48,000, down slightly year over year. Falling prices and higher incentives reflect the impact of rising interest rates, which affect monthly payments.

Both are examples that the car business is feeling the effects of a slowing economy. Tesla isn’t immune to those impacts either.

Write to Al Root at [email protected]

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