Tesla is currently providing a low financing option of 1.99% for six-year loans for customers interested in purchasing the $48,990 long-range, all-wheel-drive Model Y. This vehicle is the production version of the recently debuted car from early April. Gone are the days of Tesla needing to constantly increase prices in order to manage overwhelming demand. CEO Elon Musk now finds himself in a position where he must actively compete for each new customer. In response to a declining interest in the existing electric vehicle (EV) product line, Musk is increasing incentives for a crucial Tesla car. Just weeks after unveiling a refreshed version of the Model Y, Tesla announced discounted financing options for interested buyers. Prospective customers can qualify for a 1.99% APR on a six-year loan if they make a $3,999 down payment for the long-range all-wheel-drive model. This stands in contrast to financing rates exceeding 6% for some of Tesla’s higher-end models. The official refresh of the Model Y took place in March, with initial orders being limited to the $59,990 Launch Series designed for early adopters and loyal fans. The more affordable long-range AWD version, starting at $48,990, became available in early April. The move to incentivize demand after just four weeks on the market suggests that initial interest at full price and the prevailing market interest rate may have already peaked. Tesla did not provide a specific reason for this change and did not respond to inquiries from Fortune for clarification. In the past, Tesla faced challenges related to meeting demand due to supply constraints. However, the current issue lies in how to maximize existing production capacity given the declining number of new orders. Customers in Silicon Valley can now receive a new Model Y on the same day they make a down payment, a stark difference from previous wait times extending to months. Some current owners recommend waiting until the end of the quarter to place an order, as Tesla tends to offer increased incentives to meet sales targets. The drop in demand can be attributed to decisions made by Musk himself, including pivoting the company’s focus towards robotics and supporting unpopular political actions. Initial data indicates a sharp decline in Tesla’s vehicle sales in Europe in April. As Musk returns to his role at Tesla following his involvement with Dogecoin, the company faces a potential boycott from progressive customers who object to his approach to government streamlining. This boycott could have severe consequences for Tesla and its Model Y, despite the recent refresh.
The vehicle is crucial to the brand’s operations, being produced in four plants across three continents and accounting for the majority of the brand’s car deliveries. A decrease in demand for this vehicle could lead to a significant drop in sales volume for the company.
In Europe, where there is strong competition in the electric vehicle market, Musk’s business appears to be struggling. Tesla sales have declined in affluent and EV-friendly markets as customers opt for competitors like the new Volkswagen ID.7 electric sedan.
Unlike traditional car companies that regularly update their product lineup, Tesla has focused on software updates rather than redesigning its aging models. The Model S, for example, still shares the same construction as the first model from 2012, with only minor design changes and updated interiors.
Tesla’s strategy has been to stay competitive in the EV market through cost savings, price cuts, and software updates, including the FSD Supervised feature that operates on artificial intelligence. The success of Tesla’s robotaxi fleet scaling this year is crucial for the company’s future growth.
Investors are watching closely to see if Musk’s AI technology can disrupt the ride-hailing industry, with the first robotaxi pilot program scheduled in Austin. The company’s high valuation reflects expectations for substantial growth, largely dependent on the success of the robotaxi business rather than a Model Y refresh.
