Tesla panics, slashes prices in the US and Europe by up to 20 per cent

In a bold move seen by analysts as a sign of panic, US electric-car specialist Tesla has slashed prices across its model range in the US and Europe by up to $US21,000 – or 20 per cent.

The unprecedented price cuts come as Tesla boss Elon Musk claims to have turned his attention back to the electric-car specialist after a stalled start during his recent takeover of Twitter.

The price cuts in the US and Europe – including the right-hand-drive UK market – follow modest price reductions across the Asia-Pacific region earlier this month, including in Australia, and Tesla's key market of China.

While Tesla prices in Australia were last week trimmed by up to 4.7 per cent – and in China by up to 13 per cent – they have now dropped by up to 13.5 per cent in the UK, up to 17 per cent in Germany, and up to 20 per cent in the US.

Industry analysts say the price cuts are intended to boost sales amid slowing demand in some countries – and the arrival of a fleet of new electric-car competitors at lower prices, news agency Reuters reports.

Statements from Tesla representatives in the UK and Germany have told Autocar magazine in the UK and the Reuters global news agency the price cuts are due to a "normalisation" of the rising inflation and production costs that have seen Tesla increase prices over the last 12 months.

"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," said a statement from Tesla representatives in Europe.

For Tesla buyers in the US, the price cuts mean the entry-level five-seat Tesla Model Y Long Range now qualifies for a $US7500 government tax incentive that came into effect from January 1, 2023 – magnifying the effective price cut to 31 per cent, or $US20,500.

Prior to the Tesla price cut, only the seven-seat version qualified for the US tax credit as the five-seater was not considered an "SUV" by US tax officials – and therefore was above the $US55,000 price cut-off for normal "cars" to be eligible for the incentives, rather than the $US80,000 limit for SUVs.

However, reports say the tax credit available to Tesla buyers in the US may be reduced to $US3750 from mid-March 2023, according to electric-car specialist website Electrek.

In the US, the cheapest Tesla on sale – the rear-wheel-drive Model 3 sedan – has been reduced from $US46,990 ($AU68,000) to $US43,990 ($AU63,700) – while the largest decrease has been applied to the price of the Model S Plaid sedan ($US135,990/$AU196,850 to $US114,990/$AU166,500).

The largest percentage decrease affects the five-seat Tesla Model Y Long Range SUV, which has dropped from $US65,990 ($AU95,500) to $US52,990 ($AU76,700) – or $US45,490 ($AU65,800) once the US government tax rebate is included.

It is unclear if the savings will be passed onto buyers in the queue in the US and Europe – as they were in Australia when price cuts came into effect earlier this month.

However, Tesla buyers who recently took delivery of a car – including many before the end of 2022, when Tesla was offering range-wide discounts of up to $US7500 – expressed anger at the shock price cuts over the weekend.

It follows protests outside Tesla stores in China from owners who took delivery of cars shortly before the end of 2022 – many of which assumed prices would not fall, after government rebates were withdrawn at the start of this year.

It is unclear if Tesla is preparing another price cut for Australia to bring our market in line with the reductions seen across Europe and the US.

The price cuts in Australia earlier this month amounted to between $US1600 and $US3400 before on-road costs and Luxury Car Tax – or 1.9 to 4.7 per cent – though the prices of the mandatory order and delivery fees were increased by $50 and $25 respectively at the same time.

Tesla and Twitter CEO Elon Musk foreshadowed plans for price cuts last year, calling the cost increases on the company's vehicles over the past 18 months "embarrassing".

"Since there’s quite a long wait when somebody orders our car – it’s like six months or so, or in some cases, up to a year – we have to anticipate what the global inflation rate is over that period of time," Mr Musk told investors and media in July 2022.

"So that’s what we’re trying to do on the [price rises]. ... It’s possible that there could be a slight decrease in car prices. But this is mainly dependent on that global economic inflation, which is not something we can control."

"I do feel like we've raised our prices quite a few times there, frankly, [to] embarrassing levels."

Alongside the price cuts, a report from The New York Times newspaper (via Teslarati) claims Elon Musk has told Twitter employees he is currently prioritising the electric-car giant, stating he is completing "most of my Tesla work" before becoming available for Twitter meetings.

The controversial executive has come under increased criticism since his acquisition of Twitter, which – among other factors – has sent Tesla's share price plummeting amid a lack of confidence in Tesla's leadership among investors, as Mr Musk splits his time between the two companies.

The price of Tesla shares have dropped from $US343.50 a year ago, to $US122.39 at the end of day trading overseas today – wiping almost $US300 billion off Elon Musk's net worth in 2022, as previously reported by Drive.