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Tesla Cutting Car Prices to Spur Demand

By Howard Smith – Updated May 27, 2020 at 5:02PM

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The electric vehicle company had strong first-quarter results, but COVID-19 related lockdowns have put a damper on North American car sales.

Tesla (TSLA 1.36%) has dropped its prices by up to 6% to stimulate demand for its electric vehicles as some U.S. states begin to relax their lockdown restrictions, according to a Reuters report. Other automakers in North America are also coming out with financing and deferred payment incentives, hoping that buyer interest picks up as the economy restarts. 

The Reuters article said that data from auto analytics company J.D. Power shows that retail auto sales were likely cut in half in last month compared to April 2019. However, the firm believes that May sales are likely to improve, spurred both by incentives and pent up consumer demand. 

side view of Tesla model X

Image Source: Tesla

Tesla has dropped the starting price for its Model S to $74,990, from $79,990, while the mass-market Model 3 will start at $37,990, and the base price for its SVU, the Model X, was cut from $84,990 to $79,990. 

Tesla typically follows its price adjustments in North America with similar changes for vehicles manufactured at its Shanghai factory. Prices for the Model S and Model X in China will drop by about 4%, but it's not changing the pricing on the Model 3 in that market, the report says. 

China ordered the closure of Tesla's Shanghai plant in late January during the rising phase of the coronavirus outbreak in that country, but it was reopened on Feb. 10. After China began to relax its stay-at-home rules, the country's March auto sales reportedly were down 40.8% year over year, half of the February 80% drop. Tesla's China sales set a new monthly record in March, though, as the factory ramped up production. 

In the U.S., Tesla restarted production at its Fremont, California facility recently after a dispute with Alameda County officials over the safety precautions needed to operate the factory during the ongoing pandemic. 

Howard Smith has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Tesla. The Motley Fool has a disclosure policy.

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