Tesla’s new 0.99% financing offer follows declining revenues and deliveries, as competition intensifies in key markets and margins shrink below legacy automakers.
Tesla has launched an aggressive 0.99% APR financing offer on Model Y vehicles through May 31, marking its latest attempt to boost demand after reporting a 9% year-over-year revenue decline in Q1 2024 – its first quarterly delivery drop since 2020. The move comes as US EV market growth slows to just 2.7% and Tesla faces mounting pressure in China and Europe.
Discount Strategy Meets Market Reality
Tesla announced its 0.99% annual percentage rate financing deal on May 12 through its official website, valid through May 31 for Model Y purchases. This follows a 5% price cut for the Model Y in China on May 6, as revealed in Tesla’s China pricing updates. The aggressive financing move comes after Tesla reported Q1 2024 revenue of $21.3 billion, down 9% year-over-year, and 386,810 vehicle deliveries – its first quarterly decline since 2020.
Bernstein analyst Toni Sacconaghi noted in a May 15 research report that Tesla’s automotive gross margin has compressed to 13.5%, now trailing Ford’s 14.8%: ‘Tesla’s premium valuation was predicated on superior margins, which are now being eroded by persistent discounting.’
Competition Intensifies Globally
In China, BYD launched its Sea Lion 07 EV on May 10 with 385-mile range at just $26,000 – undercutting Tesla’s Model Y by nearly 30%. Meanwhile, Cox Automotive data shows US EV market growth slowed to just 2.7% in Q1 2024, while iSeeCars reported used Model Y prices fell 31% year-over-year as of May 2024.
European challenges mounted when Tesla’s Berlin factory halted production from May 10-17 due to suspected arson, disrupting supply amid already slowing demand. Q1 2024 European registrations fell 23% year-over-year according to ACEA data.
Brand Equity at Risk?
S&P Global Mobility reported in May that 24% of US EV shoppers now consider non-Tesla options, up from 18% in 2023. This erosion comes as Hyundai expands its IRA-compliant IONIQ lineup and Ford enhances its certified used EV program.
Historically, Tesla maintained premium pricing power through technological leadership. However, the 2020-2023 period saw legacy automakers close the gap in battery range and software features. Tesla’s average selling price has declined 25% since 2022 according to BloombergNEF data, while industry-wide EV prices dropped just 12%.
The current discounting wave echoes Tesla’s 2019 strategy when it offered similar financing deals to clear inventory before Model Y production. However, today’s market differs fundamentally – with 48 EV models available in the US versus just 12 in 2019 (Department of Energy data). This saturation challenges Tesla’s ability to maintain pricing power without continuous product refreshes, which have lagged competitors’ cadence.
