The automaker’s surprise move means Tesla’s entire lineup is now 9.5 to 19.5 per cent cheaper in Canada
Looking to buy a Tesla? Now might be the time.
In a surprise move this month, Tesla has slashed the prices of its entire line up of electric vehicles in Canada, with some percentage drops in double-digits.
While Tesla has yet to comment on the reductions, which see prices for Models 3, S, X and Y drop between 9.5 to 19.5 per cent, industry experts say the price cuts are a response to growing market competition.
“They’ve got people certainly nipping at their heels in terms of their market dominance,” says David Adams, president of Global Automakers of Canada, in an interview with Electric Autonomy. “They’re still the dominant player, but the mainstream manufacturers are coming on board and I think it’s a bit of a defensive position to maintain a market share.”
This isn’t the first time Canadian buyers have seen sticker relief when it comes to Tesla.
Late last year, Tesla also took the unusual step of offering Canadian customers a $5,000 credit on Model 3s and Model Ys purchased before December 31, 2022.
Adams says these actions are a signal that, for the first time, supply of Teslas is out stripping demand.
“For the first time they have a little bit of inventory. They’re not selling every vehicle that they’re building,” says Adams.
“Whether it’s the best thing to do from a profitability perspective, probably not. But, you know, certainly in terms of maintaining and maybe trying to move back up their market share then it makes some sense — at least in the short-term.”
Tesla in Canada
Last November, the federal Incentives for Zero-Emission Vehicles (iZEV) rebate program saw its highest ever volume of monthly claims.
Compared to previous monthly claim rates, very few of the rebates were for Teslas. Of the 5,061 claims made in November, 2022, just 41 were for Teslas.
That same month, Tesla’s creeping price hikes on all its models in Canada (twice in as many months) disqualified its entry-level vehicles from Canada’s federal and provincial EV rebate programs.
Now, sitting back at $54,990 in Canada after the recent price cuts, the 2023 Tesla Model 3 RWD is again eligible for these rebates.
“I think it’s a smart move from Tesla’s position, from the perspective of looking to defend their position as an EV market leader,” says Adams. “It’s impacting their profitability, but it’s not a situation where they’re potentially losing money on the vehicles.”
The majority of Tesla’s vehicles remain well above the rebate limits. As well, some are subject to Canada’s recently introduced luxury vehicle tax. Under that policy each vehicle over $100,000 is subject to an additional 10 to 20 per cent sales tax.
Tesla’s other price reductions include:
- Model 3 Performance, $72,990 (was $83,990)
- Model S Long Range $122,990 (was $136,990)
- Model S Plaid $149,990 (was $178,590)
- Model X Long Range $142,990 (was $157,990)
- Model X Plaid $156,990 (was $185,590)
- Model Y Long Range $69,990 (was $86,990)
- Model Y Performance $72,990 (was $83,990)
And while the cost news from Tesla is largely about savings, the automaker did quietly increase the price of a seven-seater Model Y by $1,300.
So, how exactly will the other EV-makers respond to the Tesla price cuts?
It remains to be seen. But at first glance, says Adams, it’s a power move few other companies can match.
Even those that are successfully bringing a steady volume of EVs off their assembly lines are still playing catch up to Tesla. In its Q4 2022 preliminary results, the automaker stated: “In 2022, vehicle deliveries grew 40% YoY to 1.31 million while production grew 47% YoY to 1.37 million.”
Where Tesla, as an early manufacturer of EVs, has also carved out a key advantage for itself, says Adams, is in its supply chain.
Tesla has either had the lead time to bring in-house or lock in the various elements of its supply chain. Securing long-term, high-volume supplies of critical minerals at low prices, for instance, has resulted in cost savings that many other OEMs are not seeing.
Instead, as those companies look to pivot to commercial-scale EV and battery production, fluctuating global prices for minerals and difficulty securing access to battery materials have taken a toll.
For these reasons, buyers anticipating that Tesla is kicking off a trend of long-awaited price parity between EVs and combustion vehicles may be jumping too far ahead.
“This is what I guess will remain to be seen as we move forward with EVs as the cost of batteries becomes less expensive,” says Adams.
“For most other traditional automakers that are making EVs — whether they’re not making money on EVs, or, if they are, it’s not very much money…can the other market players afford to follow Tesla in this regard? I think it’s probably not likely.”