Tesla has taken an axe to slash the prices of its range of electric cars in Europe and the USA. The United Kingdom, for example, has seen prices of the Model 3 and Model Y reduced by as much as £8,000 for entry-level models. The Tesla Model 3 now starts at £42K before options, and the entry-level Model Y starts at £44K. Musk previously indicated price reductions would be phased in to combat the prospect of higher interest rates and recession.

However, the stock markets acted negatively towards the news as Tesla’s share value dropped by 4.5 percent. Nevertheless, Musk stated last year that prices had risen to “embarrassingly high” levels and as such, demand could be hurt. Even with the previous price point, Tesla was still experiencing excessive demand, and the price cut will only accelerate demand furthermore.

China and the USA represent 75 percent of total Tesla sales, but that should change as Tesla begins to optimize production at its newest gigafactory in Berlin Germany. Demand in Europe is strong where the Model Y was the best-selling car in November and December of 2022.

The VW ID3 and ID4 are Tesla’s top competitors in the European EV turf war but neither are a match for Tesla in terms of performance, efficiency, and technology. Tesla has also lowered prices in the USA. Discounts for the long-range Model Y, together with government subsidies, amount to 31 percent.

In China, Tesla discounted models by as much as 14 percent which prompted owners who missed out to protest for compensation. Price cuts have also been implemented in Singapore, South Korea, Japan, and Australia.

While the price cuts will boost demand Tesla could find itself in a position of being unable to fulfill every order while conversely delivering more. Tesla has to sell and deliver more cars in 2023 to offset the price cuts, if it doesn’t it could actually make a loss.