Tesla Model Y price reduction: In a strategic move aimed at stimulating sales, Tesla Inc has announced a temporary price reduction for certain models of its popular Model Y vehicles in the United States. The price adjustment, effective until February 29, comes shortly after the electric car giant lowered prices for Model Y cars in Germany.

The adjustments entail a $1,000 reduction for the Model Y rear-wheel drive and the Model Y Long Range, now priced at $42,990 and $47,990, respectively. This translates to discounts of 2.3 per cent and 2 per cent from their previous prices. Notably, prices for the Model Y Performance variant and other models remain unchanged, as indicated on Tesla's website.

According to a notice posted on Tesla's website, the reduced prices for the specified models will apply to deliveries made through the end of February. Starting March 1, the prices are set to increase by $1,000 or more.

This move follows Tesla's recent price adjustments in Germany, prompted by disruptions in car production at its Berlin factory due to component shortages following attacks in the Red Sea causing shipping disruptions.

In January, Tesla issued a warning of "notably lower" sales growth for the year as it shifts its focus toward the production of its next-generation electric vehicle, internally referred to as "Redwood." These price cuts are expected to further impact Tesla's margins, which have already been under pressure due to a prolonged price war that commenced over a year ago.

Tesla's decision to slash prices comes amidst expectations of subdued demand and heightened competition, particularly from an increasing number of affordable electric vehicles, including those manufactured by China's BYD, which surpassed Tesla as the world's leading EV maker in the final quarter of 2023.

In another indication of potential cooling in EV demand, rental giant Hertz Global Holdings announced in January its decision to sell approximately 20,000 electric vehicles, including Teslas, from its US fleet, opting instead for gas-powered vehicles due to higher costs associated with collision and damage for EVs.

Year-to-date, Tesla shares have experienced a decline of 22.1 per cent, reflecting investor concerns amidst evolving market dynamics and competitive pressures in the electric vehicle sector.

(With Reuters inputs.)