Tesla has announced it has slashed the price of its electric cars in the UK with immediate effect, sparking outrage among existing customers – especially some of the 16,000 drivers who took delivery of vehicles at the higher price just last month.
The auto maker confirmed on Friday that it has cut the price of both the Model 3 and Model Y as of today across Europe and the US. In the UK, prices have been lowered by as much as £9,100, with the company citing ‘normalisation of some of the cost of inflation’.
Tesla owners who have received cars in recent weeks are understandably upset by the move and are calling to be compensated or provided with free charging.
One reader told This is Money: ‘After being pushed to take delivery in December I am furious about the fact the exact same model and spec I took delivery of on 23 December is now £7,000 cheaper.
‘This has made me lose all faith in the company after having multiple issues with the car since delivery also.
‘How will they make it right to me and many other customers?’
Good news if you plan to buy a Tesla; bad news if you’ve recently taken delivery: The US brand has confirmed it has slashed the price of its Model 3 and Model Y with immediate effect
Another This is Money reader, David Hutchon, told us he had taken delivery of his Model Y four weeks ago at a cost of £60,000.
‘Of course it is upsetting when an item you have just bought drops in price but with such an enormous amount involved it is gutting,’ he said.
‘If Tesla wants to encourage sales they should guarantee the current price and refund anyone who bought since their last price rise.
‘Or at least provide some other compensation, like free fast changing for the next three years.
‘If they can afford to drop the price by £10,000 it means they were overpriced originally.’
Similar surprise price reductions announced in China earlier this week ignited anger among existing Tesla customers, hundreds of whom stormed showrooms across the country to vent their frustration at paying 24 per cent more for the same cars just weeks earlier.
The move is a double-blow for existing owners, with This is Money revealing earlier this week that demand for used Tesla cars has plummeted in the last four months.
It has seen the price of year-old examples dropping by more than a fifth compared to their value in January 2022, which in some cases is a decline of up to £18,000.
How much does a new Tesla cost today?
The Model Y SUV – the best-selling electric car in Britain last year and the third most-bought new car across all fuel types – now starts from £44,990, having cost customers from £51,990 up until Thursday evening.
The biggest reduction is on the range-topping Model Y Performance, which now costs £59,990, having previously been priced at just over £69,000.
As for the Tesla Model 3 – last year’s second most popular new battery electric car – the entry price now starts at £42,990.
The biggest cuts to the Model 3 amount to £8,100 – also for the range-topping Performance variant.
This could see a rise in demand for Tesla’s smallest car, with the price cut meaning the Model 3 now costs less than some of its biggest rivals.
It will undercut the Kia EV6 (from £45,245) by £2,255 and ring in at £160 less than the entry Polestar 2 (from £43,150).
The biggest reduction is on the range-topping Model Y Performance, which now costs £59,990, having previously been priced at just over £69,000
The Tesla Model 3 now starts at £42,990 following the price cuts, meaning it now costs less than some of its major rivals
The company says the price cuts are the result of being able to pass on lower overheads to buyers.
However, industry insiders have raised concerns about the appetite for Teslas in recent months, both on the new and used market.
Experts said the brand is ‘doubling down’ on a discount drive it started in Asia as demand slows against the backdrop of a weakening economy.
The Elon Musk-led company missed its target in 2022 to grow deliveries by 50 per cent annually and reported that sales of its China-made cars hit a five-month low in December, underlining the hit from rising interest rates and growing recession fears.
In a statement issued on Friday morning, Tesla UK said: ‘Our focus on continuous product improvement through original engineering and manufacturing processes have further optimised our ability to make the best product for an industry-leading cost.
‘As we exit what has been a turbulent year of supply chain disruptions, we have observed a normalisation of some of the cost inflation, giving us the confidence to pass these through to our customers.’
The statement continued: ‘As local vehicle production continues to increase and we gain further economies of scale globally, we are making Model 3 and Model Y even more accessible across EMEA [Europe, the Middle East and Africa].’
Protesters gather at a Tesla showroom in Chengdu, Sichuan, China, on 6 January after the brand announced huge price reductions on its new cars
Crowds also gathered inside the showroom in Chengdu. Demonstrators slammed the sudden discounts of the Tesla Model Y and Model 3, claiming they had missed out on the price cuts
Price cuts will be celebrated by potential buyers but they’ve enraged existing customers
While the price cuts are good news for buyers looking to order a Tesla from today, it will irk customers who have placed orders ahead of Friday 13 January and especially those who bought the brand’s electric cars in the last few months.
This includes 16,368 motorists who took delivery from a massive shipment of vehicles that arrived in December, of which 10,664 were Model Y SUVs and the remaining 5,704 Model 3 saloons.
It means customers in the UK who received their Teslas last month could have saved in the region of £130million if they had delayed their purchases to January.
Several members of a Facebook group for UK Tesla owners also went online to express their frustration at the policy.
One wrote: ‘I just picked up the car yesterday. What should I do? Go to Tesla and give back the car? I can’t believe after a few hours from picking up the car I lost £5k.’
The reductions were described as ‘shocking’ by one person, who wrote that they ‘paid £5,000 more last week’.
Another described a period in late November and early December as the ‘worst three weeks to get a new Tesla in history’ due to the subsequent price cut combined with other issues.
He added: ‘(It) would be nice if they made a gesture to us.’
Autocar says a Tesla spokesperson has told the magazine that all undelivered orders will have their pricing updated automatically to reflect the changes announced on Friday, provided that the original fee is higher.
Today’s surprise price cuts follow similar reductions announced in China earlier this week.
This caused angry protests at Tesla dealers across the country as new owners demanded rebates, having seen the price they paid for their cars slashed by up to 24 per cent.
This is Money has contacted Tesla UK for further comment regarding if it plans to reimburse customers who took delivery of cars in December. We have yet to receive an official response.
Customers overseas have also been having their say on the price reductions.
Greg Woodfill in Seattle, who bought a Model Y in December, had considered waiting until the new year to get the US subsidy, but was lured by a discount at the time of $3,750.
‘It’s a punch in the gut, to be honest,’ he told Reuters on Friday, adding that it feels unfair Tesla sought to boost fourth quarter sales with discounts, only to cut prices a month later.
‘If they knew they would drop the price this much, they should have just done it in December.’
Protesters outside a Tesla showroom in Chengdu, Sichuan, China, on January 6, 2023
Responding to the news, Ginny Buckley from specialist website Electrifying.com said: ‘The news from Tesla today will be welcome news to many who are looking to buy a new car, particularly as other electric car manufacturers are increasing their prices.
‘However, there will be plenty of customers who took delivery of a new Tesla in December who are bound to be less than impressed by the move, which could ultimately undermine confidence in the company.
‘Car makers will usually carefully manage prices and incentives to avoid crashing used values and upsetting customers.
‘Those looking to buy on finance could also take a hit, as the uncertainty makes it difficult for leasing companies to predict how residuals may look at the end of the finance term.’
She added: ‘This controversial move from Tesla is bound to send shockwaves through the industry.
‘With the premium brand now sending signals that it’s becoming much more mainstream; it now means the Model 3 costs less than rivals from brands such as Polestar and Kia.’
Experts say Tesla’s price cuts will not only upset customers but undermine confidence in the company
Fiona Howarth, CEO of Octopus Electric Vehicles, had a far more positive spin on the announcement.
‘Tesla is the Apple of the car sector. We’re delighted to see these EV leaders cut prices,’ she explained.
‘By heavily investing in their supply chain, they continue to make EVs increasingly affordable.
‘It’s over to other suppliers to keep up – opening up low cost, fun electric driving for all.’
Double blow for existing Tesla owners with used values taking a hit
While some will welcome the lower price of the luxury electric cars, this latest move will likely increase tensions between existing customers and the brand fronted by Elon Musk.
Used electric car values are in freefall
Valuations data seen by This is Money suggests that demand for second-hand electric cars is in decline – and it’s impacting Teslas most.
The price of a year-old Model 3 is down 21.4% compared to what it would have been valued at in January 2022, while the Model S has slipped 20.5%, which translates to a financial loss of almost £18,000.
The Model X crossover is also down 12.9% in a year.
Many Tesla drivers were already infuriated over their ownership experience over Christmas, having been forced to spend hours waiting for available charging points while attempting to visit friends and family over the festive period.
The price reductions will be a double-blow to those who took delivery of Teslas in recent months who are already seeing the value of their cars go into freefall.
According to valuation data supplied to us by Cap HPI, a one-year-old Model 3 with 10,000 miles on the clock today is worth £36,300.
Some 12 months earlier, a Model 3 fitting the same description was valued at £46,200.
That’s a fall in value of 21.4 per cent, or £9,400.
Second-hand Model S saloons have seen a similar level of value decline, falling £17,916 on average in the last year, down from £87,266 in January 2022 to £69,350 today – a drop off of 20.5 per cent.
The Model X is also down 12.9 per cent, which translated to a financial loss of £12,829.
Electrying’s Ginny Buckley told us: ‘I’m concerned about the knock-on effect this will have on used Teslas, as slashing prices on their new cars by this much will have a huge impact on their resale values.’
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