The US electric car manufacturer Tesla is now also heating up competition in Europe and the USA with price cuts in the face of weaker demand.

According to the new price information on the Tesla website, customers in Germany will have to pay between one and 17 percent less for the Model 3 sedan and the best-selling Model Y, depending on the configuration, according to Reuters calculations. Last week, Tesla had already significantly reduced prices in China and other Asian countries. Tesla confirmed that the entry-level prices of the two best-selling e-cars Model 3 and Model Y in Germany had been reduced by 6,000 euros and 9,100 euros to around 44,000 euros and 45,000 euros respectively. The car manufacturer justified this with cheaper production: "At the end of a turbulent year with supply chain disruptions, we have now achieved a normalization of some of the cost inflation."

Like its German competitors, the carmaker led by billionaire Elon Musk was able to push through higher prices last year as supply was tight due to a shortage of parts. Analysts expect the special boom to end later this year as the semiconductor bottleneck eases, while demand for cars would barely grow in a weak economy and high inflation. "We assume that the price cycle is running out of steam," explained the analysts at Bernstein Research. In Europe, this will only become noticeable in the second half of the year due to the high order backlog.

OUTLOOK FOR THE AUTOMOTIVE MARKET GLOOMY

In the USA, Tesla is cutting prices by six to 20 percent. On its home market, the Tesla Model Y will first slip into the category of e-cars subsidized by the government since this year thanks to the price reduction, making it around 30 percent cheaper overnight. In Tesla fan forums, users complained that this was unfair to buyers who had recently paid even more for a new car. In China, this led to protests outside delivery centers. Angry customers demanded refunds, which Tesla initially refused. Analysts said that the price reductions could boost demand in China and increase pressure on competitors to also offer lower prices. This could degenerate into a discount battle.

On its way to becoming a mass manufacturer, the electric car pioneer increased sales by 40 percent to 1.31 million vehicles last year. Musk had originally targeted an increase of 50 percent. In December, Musk said that the "radical" interest rate hikes had changed the outlook for the car market, meaning that Tesla could lower its prices to ensure continued sales growth.

(Report by Victoria Waldersee, Zhang Yan, Hyunjoo Jin and Kevin Krolicki, written by Ilona Wissenbach and Myria Mildenberger, edited by Hans Seidenstücker; If you have any questions, please contact our editorial team: frankfurt.newsroom@thomsonreuters.com (for companies and markets)).