The base Model 3’s price was cut $3,000 to $43,990. The starting price for the midsize Model S was reduced by $10,000 to $94,990 and the midsize Model X saw an $11,000 drop to $109,990.
“This is what we call using the demand levers,” said Loren McDonald, CEO of analysis and consulting firm EVAdoption.
McDonald said potential buyers may have put their Model Y orders on hold waiting for a firm set of rules from the Treasury Department regarding the tax incentives. The price cuts offer a strong stimulus to buy now since the $55,000 cap is no longer an issue.
Tesla offered temporary $7,500 price cuts in December in the U.S., but only for inventory models. The new price reductions also apply to new orders.
Over the past two years, Tesla had steadily increased prices for its lineup due to strong demand for EVs and limited supply by competitors struggling with supply-chain shortages. Wait times for the base Model Y stretched to six months or more even with the hefty increases. But times have changed.
Global price cuts
Earlier this month, Tesla cut prices in China by 6 percent to 13.5 percent. After the reductions, there were signs of increasing demand as wait times for new Teslas increased by a few weeks.
Tesla has also reduced prices in other markets. Reuters reported that the EV maker has cut prices in South Korea, Japan, Australia and Singapore. Tesla also cut prices in the UK, France, Italy, Austria, and Switzerland.
Tesla said on Friday that was able to provide its cars at a more accessible price in Germany because cost inflation was normalizing.
“At the end of a turbulent year with interruptions to the supply chain, we have achieved a partial normalization of cost inflation, which gives us the confidence to pass this relief onto our customers,” a spokesperson for Tesla Germany said in a statement.
Last year, the U.S. and China combined had accounted for about 75 percent of Tesla sales, although the automaker has been growing sales in Europe, where its factory near Berlin has been ramping up production.
In China, where Tesla cut prices last week by 6 percent to nearly 14 percent, owners protested at delivery centers across the country, pressing Tesla for compensation.
Analysts had said the China price cuts would boost demand and deepen the pressure for its rivals there, including BYD, to follow suit in what could become a price war in the largest single market for EVs. That pressure could be building in Europe as well.
Last month, Musk said “radical interest rate changes” had changed the industry-wide outlook and that Tesla could lower pricing to sustain volume growth, which would result in lower profit.
Reuters and Automotive News Europe contributed to this report