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Tesla Slashes Prices on Model Y to Clear Inventory Stockpile
Tesla has recently announced a significant price reduction on its popular Model Y electric crossover in an effort to clear out a surplus stockpile of vehicles. The move comes after the company found itself with 46,561 more cars in inventory than it delivered in the first quarter of 2024, marking its largest inventory surplus ever.
Price Reduction Details
The American automaker, headquartered in Austin, Texas, is implementing price cuts on various Model Y configurations to stimulate sales and reduce excess inventory. Specifically, the rear-wheel-drive Model Y will see a price reduction of $4,600, while the Model Y Long Range and Model Y Performance variants will receive price cuts of $5,000 each.
According to Bloomberg, these price adjustments bring the starting price of the Model Y RWD to $33,890, the Model Y Long Range to $37,490, and the top-end Model Y Performance to $40,690. Additionally, Tesla is offering three months of free Full-Self Driving beta as an added incentive for potential buyers.
Factors Influencing Inventory Surplus
Tesla has attributed part of the inventory surplus to global sales declines, which were exacerbated by logistical challenges such as shutdowns at its German factory and the retooling of its Fremont, California plant to produce the upgraded Model 3 sedan. However, some industry analysts have questioned this explanation, suggesting that demand constraints may be a more significant factor.
“The difference between the number of vehicles Tesla built and sold in the quarter ‘dispels the notion that 1Q deliveries were somehow supply rather than demand constrained,’ wrote Ryan Brinkman, a JPMorgan Chase & Co. analyst.”
Brinkman, who holds a sell rating on Tesla stock, revised his price target for the company’s shares downwards and adjusted his revenue and earnings per share estimates accordingly. He now forecasts a significant free cash outflow for Tesla due to the excess finished goods inventory.
Market Response
Following the announcement of price cuts and inventory surplus, Tesla’s stock has experienced a decline of approximately 2.7 percent as of Friday afternoon. Year-to-date, the stock has fallen by over 33 percent, reflecting investor concerns about the company’s inventory management and sales performance.
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