IT House news on April 16, recently, Tesla opened the fifth price reduction in 2023 in the United States, which has aroused widespread attention from the outside world. Some people think that Tesla is starting a price war between electric cars and internal combustion engine vehicles, while others wonder why Tesla should cut prices when the market demand is strong.
In response, Musk responded on Twitter. "We're not 'starting a price war,' we're just lowering prices to achieve affordability at scale," he said. What he meant was that Tesla's goal was not to beat the competition, but to make electric cars affordable for more people.
IT House noted that Tesla's price cut was impressive. In the case of the Model Y, the price of the car dropped by 24% in 2023, from $54,000 to $41,000. This is very rare in the automotive industry, because usually, the price of a new car is gradually increased after it is launched to maintain profit margins. Tesla, on the other hand, has done the opposite, constantly reducing costs and prices, even making the Model Y price lower than the average price of a new car in the United States ($46,000), and can also enjoy the tax benefits provided by the federal government.
Why would Tesla do this? Some analysts believe that Tesla does not rely on traditional media advertising to promote its products, but attracts consumers through social media and word of mouth. Tesla and Musk himself have hundreds of millions of followers on Twitter, attracting attention by posting the latest product information and technological advances. As a result, Tesla can save a lot of money on advertising and use this money to reduce prices.
But more importantly, Tesla doesn't see itself as just an automaker, but as a software company. Tesla's biggest bet is its Full Self-Driving (FSD) software, and if this software succeeds and is recognized and supported by the government and society, Tesla will have a large and stable source of revenue. As a result, Tesla wants to be able to produce and sell more cars and connect them to its own network.