Tesla’s Fight for EV Pricing Supremacy – Can They Become the Amazon of the Car Industry?

Tesla recently put in place a huge price decrease of up to 20% on certain models in January of 2023. Within just one month after the price decrease, the federal tax credit regulations has changed to include more Tesla Model Y’s, Tesla had increased their prices on Tesla Y and 3 around $500 to $1,500 per model. Just the past March, Tesla continued price cuts of the Model X and Model S around $5,000 to $10,000. Elon Musk recently indicated that small changes in price have a major impact on the demand for the vehicle. 

The size, bidirectional nature, and frequency of Tesla’s prices are completely unprecedented within the automotive industry, with ramifications almost certain. After an extended period of not meeting demand, increased competition from existing automobile companies, and even new companies, Tesla had seen a drastic backlog drop by the end of 2022. 

In order to combat this issue, and even make some of their vehicles qualify for federal tax credits, Tesla has made moves to take advantage of the highest gross margins thanks to their sales model, manufacturing technology, and the investment in their batteries. Due to these factors, Tesla is in prime position to be able to produce electric vehicles cheaper than any other competing company is. Along with their technology, distribution advantages by not using dealers, dynamic pricing, they have effectively become the Amazon of the electric vehicle industry. 

Tesla's Fight for EV Pricing Supremacy - Can They Become the Amazon of the Car Industry?

Market Response

Edmunds had recently noted that the search ranking for the Tesla Model Y has gone from seventieth to second in just one week after the price cuts by Tesla. The used car prices for Tesla have dropped by an astounding $18,000 since July of 2022, making them significantly more affordable than ever before. Electric vehicles are not the only used prices to come down, all used car prices are down 8.7% from the previous year. Tesla’s stock itself has also gone up significantly. 

Competitive Landscape

With the number of electric vehicle companies on the rise, this article will be examining the Model Y with its closest competitors in 2023, and are limited to those with over 300 miles of range. The closest to the Model Y is the Ford Mach E, which matched Tesla’s price drop on the Mach E by dropping it anywhere from $900 to $5,900. Ford is currently the only company that has responded to Tesla’s price cuts, by implementing their own cut as well. 

The Model Y is competitively priced, but is not the cheapest 300 mile SUV electric vehicle on the market – they are effectively middle of the pack. Tesla does have several factors that helps push their car over its competitors like Tesla’s charging network, self-driving AI technology, and other features like pet mode, camp mode, and even more cargo room. In terms of pricing, the Hyundai Ioniq 5 starts at $41,450 – the cheapest mid-size SUV EV, while the highest priced EV is the Fisher Ocean, starting at $68,999. 

Impact to Current Tesla Customers

Impact to Current Tesla Customers

The recent price cuts have made new customers of Tesla ecstatic, while established owners are upset with the recent price reductions. As of now, Tesla has not made any concessions to the worldwide protests, which is unsurprising. 

Impact on Emerging EV Companies

The long term impact of the moves by Tesla will determine the viability of other emerging electric vehicle companies like Fisker, Rivian, Lucid, and Faraday. Thanks to the changing landscape with the supply chain issues, higher vehicle financing costs for the consumers, and continued margin pressure, the companies will struggle to remain open. With low debt and overhead due to the contract manufacturing model, industry expertise, and differentiated products like Ocean, Pear, and Fisker are likely to remain open. 

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For those looking into purchasing an electric vehicle, Tesla is currently the cream of the crop. It is unsurprising since Tesla has been working on their electric vehicles for quite some time. Thanks to their early push for electric vehicles, Tesla is associated as being the “Amazon” of automobile companies. 

Ship A Car is an excellent option with a solid track record if you’re looking for a trustworthy and knowledgeable business to effectively manage the challenging process of shipping your electric vehicles, whether they are brand new or used. They have the essential knowledge and dedication to lead you smoothly through each stage of the transportation processes, guaranteeing that you have an enjoyable and hassle-free trip.