Tesla undercuts average new car price by nearly $5,000
Automaker announces its global engineering headquarters will be based in Palo Alto
It's never been this cheap to buy a Tesla.
After a hopscotch of price cuts over the past month, Tesla's Model 3 sedan now sells for $4,930 less than the average new vehicle sold in the U.S. That's the cheapest price Tesla has ever had relative to the typical U.S. vehicle, according to a Bloomberg analysis.
It's a similar story for Tesla's more expensive Model Y sport utility vehicle, which started off the year with a staggering $13,000 price drop. Even before those cuts, it was the third best-selling SUV in the U.S. last year after the Toyota RAV4 and the Honda CR-V. Tesla brought Model Y prices back up slightly after it sold out build slots through at least the first quarter in the U.S.
Tesla's first price cuts on Jan. 12 were steep and sudden and they continue to reverberate. Ford Motor Co. quickly followed by slashing prices of its electric Mustang Mach-E. Lucid Group Inc. with $7,500 discounts.
General Motors Co. is slated to launch electric versions of its Chevrolet Blazer and Equinox SUVs later this year, right in the thick of America's first EV price war. As Morgan Stanley analyst
Adam Jonas put it, “the EV market may be entering the `shake-out' phase.”
At the same time, prices of gasoline-fueled cars have moved in the opposite direction. The average cost of a new vehicle has risen more than $10,000 since the start of the pandemic, to $47,920 in January. This has been driven by a shortage of computer chips, raw material inflation and deliberate decisions by manufacturers to keep inventories low and prices high while they spend heavily on developing electric cars.
After two more cuts to Model 3 prices, Tesla's cheapest vehicle starts at $42,990. That doesn't include a $7,500 U.S. tax credit for electric vehicles that went into effect in January, which for those who qualify, would bring the price to $35,500 — almost $12,500 less than the average price paid for a new vehicle in the U.S.
Tesla's global engineering hub lands in Palo Alto
Tesla has decided to base its engineering headquarters in Palo Alto at a former Hewlett-Packard site, CEO Elon Musk said Wednesday in an announcement with Gov. Gavin Newsom.
“We're excited to announce that Tesla's global engineering headquarters will be right here in the former headquarters of HewlettPackard,” Musk said. “This is a poetic transition from the company that founded Silicon Valley to Tesla.”
The decision to place the engineering headquarters in Palo Alto represents a win for California and its political establishment, which were jolted when Tesla in 2020 revealed it would decamp from the Golden State and move the company's headquarters to Texas.
In comments at that time, Musk said he wanted the Tesla headquarters to be closer to one of the electric vehicle maker's factories as well as a SpaceX complex, both in Texas.
But Musk also criticized California's sour business climate and economic environment for his decision to shift the Tesla headquarters from Palo Alto to Texas.
“If a team is winning for too long, they tend to get complacent,” Musk said in December 2020. “California has been winning for a long time and I think they're taking it for granted.”
For Newsom, Tesla's decision also represents a win at a time when his second term in the governor's office has stoked speculation about his possible future plans regarding national politics.
The governor also indicated that he's well aware that California can't be complacent, even if its economy would be one of the world's largest.
“I recognize the world we invented is now competing against us,” the governor said. “You can't rest on your laurels.”