Troubles for Tesla

There are raising concerns among industry analysts that inventory is growing for Tesla as demand for the company’s electric cars may be starting to slow down as other options become available for its potential customers.

Last year Tesla produced 254,530 cars and SUVs and delivered 245,240 showing that demand for the brand and its products might be slowing in the face of increased competitive pressure.  This increased pressure has Tesla entering a new phase of its business and like other automakers, Tesla will either have to cut production or reduce prices to meet slowing demand in an attempt to increase unit sales.

Tesla has opted to reduce unit costs and lowered each of its three models by $2000.  Tesla has said that the price reduction will help customers deal with the loss of a $7,500 federal tax credit, which was reduced to $3,750 this month for Tesla buyers and will gradually go to zero by the end of 2019.

Under federal law, buyers get the full tax credit until a manufacturer reaches 200,000 in sales since the start of 2010. Tesla hit 200,000 in July of last year but the full credit continued for vehicles delivered on or before December 31st.

The good news for Tesla is that Model 3 sales should grow worldwide as the company expands its distribution and begins to offer leases.  Deliveries in Europe and China will start in February, and a right-hand-drive version is coming later in the year that will drive demand in those markets.

By Jamie Barrie