Tesla Prize cuts! Wait and Do this instead!

2023 is just getting started and its already shaping to be a year of crazy news in the economy and the automotive industry in general. Over the past few years, the pandemic has brought a lot of disruptions to global supply chains and almost all industries were affected. I remember watching the TV in horror as everything seemed to be in short supply, especially semiconductors.

Semiconductors or chips are required for everything these days from basic electronics and toys to automobiles. The average modern vehicle uses over 3000 chips alone, before factoring all the chips that are needed for the heavy machinery needed for building an average vehicle.

These shortages lead automakers to increase prizes astronimically all in the guise of keeping up with higher components costs from disrupted supply chains. Tesla was certainly not left out of the party. Tesla Model Y Long range vehicles for example, climbed in cost from around $45K to about 65K, almost a 50% increase in price. The craziest part was the used Tesla Market, used Teslas were selling higher than their initial purchase price, as wait times for New Teslas stretched out to 6 months or longer.

This was clearly a bubble and the Federal Reserve came to the rescue with the fastest interest rates increases in our lifetime, to tame the run away inflation in car prizes and the entire economy. With the economy starting to cool through 2022, Tesla started to have some trouble selling all their vehicles. Moreover the inflation Reduction Act signed by President Biden in Late 2022, meant that a lot of Tesla could theoretically qualify for the $7,500 tax credit for new EVs made in North America (Full qualification guidelines are published on the IRS wesite).

2022 ended with Tesla giving a discount of $3,750, followed by $7,500 as demand started to slow precipitously in 2022 and inventory piling up all over the globe for the automaker. When deliveries total was announced in early 2023, the automaker missed its delivery target and the already battered stock crashed yet again.

So in early 2023, reports emerged that Tesla had cut prices of its vehicle by as much as 20% in China and it was only a matter of time before those price cut came to North America. About a week ago from the publishing of this article, Tesla has since cut its prizes by as much 20% for the Model Y Long range Dual Motor and the internet has gone crazy with everyone on the internet saying what a great deal it is right now to buy a brand New Tesla. But I beg to differ and here is why.

First, with the economy standing on one leg at the moment, and interest rates still very high it makes no sense to go buy a depreciating asset with a potentially high interest rate. No matter how Elon Musk sugarcoats his vehicles, saying they are appreciating assets, he is wrong. If you go on sites like Cargurus.com, you will find used Tesla prices being cut by as much as 20 – 30% and even Doug DeMuru mentioned in one of his latest youtube videos that Teslas are selling at significant discounts at his auction website. The Inflation reduction Act that pushed Tesla to reduce its prices would be in effect for the next 10 years, so Tesla would be inclined to keep its prices low to continue to maintain its marketshare. There would great deals and a glut of Teslas to chose from if you are patient and don’t fall for the current hype.

Second, if we actually fall into a recession in 2023, there would be mass layoffs and many people would unfortunately lose their source of income. It would be unwise to have a brand new or overpriced used Tesla vehicle and a potential auto loan liability. Assuming you are part of the 85% of Americans that use an autoloan. So in my opinion, holding off on any new vehicle purchase right now is the best call and even Billionaire’s like Jeff Bezos mentioned in his recent interview, that its time to tighten our collective belts, reduce overall debt, wait and see how things play out in the economy.

The third reason you should not buy a Tesla right now is the stock. Over the past year, Tesla stock (TSLA) has performed abysmally, with losses of over 65% in 2022. Instead of buying a Tesla Vehicle right now, it might be a better move to invest in the stock directly as they are on sale at the moment. I am personally looking to buy some stocks over the next few weeks and 5 years from now, it will more than pay for my future Tesla.

In conclusion, while it’s certainly attractive to pull the trigger on a new Tesla right away, you may end up regretting it like the many Tesla owners who bought Tesla at the peak of the market and are now holding significantly devalued vehicles. Making the right finacial decisions takes patience and discipline, and if you are looking at paying down debt, take a look at this article. As we continue to navigate this economy, I wish you the best and I hope you make the best best decisions for yourselves and for the financial health of your families!