Oh my goodness, the sky is falling Tesla is dropping prices. The company's going out of business. You gotta move to the south of Spain where there's no rain and you have to change your name. Oh my goodness No no no relax.

By the way, welcome to this beautiful Friday My name is Tom Nash and today we have to talk about the Tesla price. Cuts Yes, Tesla dropping prices significantly. But as I'm about to show in this video because I always give you the bottom line first that's actually a good thing and a 4D chess move that's about to make Tesla A lot of money Now bear with me here I'll explain everything, what happened and what's gonna happen. Now if you're here for the Fud and you want me to hate on Tesla I Mean there's plenty of channels that kind of regurgitate this Pavlovian Tesla hate and Elon hate, feel free to watch that.

But I'm going to give you the analysis the way I See it now. look: I'm a bull of Tesla I'm an investor of Tesla Obviously I want the company to succeed but I'm not gonna write its D just because I'm an investor. If there's problems, I'm gonna call them out now. Look, this is what happened.

So Tesla basically announced that they're dropping prices again significantly across the board about 10 percent on the model S and the model X. But more importantly, twenty percent. Twenty percent on a Model Y which is very significant. Even the Model 3 Performance is now going to be 54 000.

Now the crazy part is that beyond the model 3 Performance you can now get the base model Y for 53 000. That's all the way down from 66 for the base model before the price drop. Now is this a bad idea? Does this mean that Tesla is losing ground? They can't compete. They're dropping prices because they're getting beat.

The margins are gone like the company's going back up. No, none of this. Let me explain to you exactly what's going on. This is literally a combination of four different 4D chess moves by Tesla and Elon Musk.

Absolutely brilliant. Now here's what's going to happen right now. Look, we all talked about it just last week how the government screwed the pooch right. They released the regulations for this new EV credit and they basically Declassified the model Y from the EV tax credit as an SUV Which means that they now have to compete within their fifty five thousand dollar range.

So if the Ford Mustang if the GM Cadillac lyric and the you know the base model Y five-seater is now not under 55 000, they will not get this 7 500 credit. So what did GM do? Nothing They complain. What did Ford do I Don't think Ford even got the memo I think for for the display. Probably don't even know about the Evita is created that.

What did Tesla do? well? Tesla actually didn't sit around and wait for the government because you know GM and Ford they're really used to just sitting there and waiting for the government to bail them out like they did many, many times in the past. This is not waiting on anybody. So what did they just do? Look at this, What happened. Look at Model 3 Performance and look at Model Y.

Both cars are now right on the money just under 55 000 so they can clarify. clarify so they can qualify for the EV tax credit of 7 500 which is Huge Huge. And I'll explain in a second why this is not just a price cut to handle. Uh, you know, some sort of a demand failure? That's not what it's all about Now look in 2021.

You have to understand what happened. Go. and you know, when in doubt, zoom out in 2021. Tesla Actually raised the prices for the Model Y by 17 000 all the way up to what we have right now now.

they're now reducing the price by Thirteen thousand dollars just a year later. So in aggregate, in net, we're still about four thousand dollars higher than what we were when the car actually launched. So this price drop is just a backwards adjustment to the original price that can still actually be painful. that is if you don't have margins.

But here's the thing: Tesla have plenty of margin. Ask yourself this question: Why didn't GM do it? Why didn't four do it? Why didn't they drop the Mach E and the lyric below Fifty Five Thousand dollars like Tesla just did with the model Y because they literally can't their margin. and I'm not here to tell you all about this for the first time because you probably know this already. But the margin for Ford and GM the gross margin on cars is about 11 and that's across the board including the more profitable ones.

Tesla is a 25 four percent. so they have way more margin more than double the margin of GM and force. which means they can actually do this and not get absolutely annihilated for the gym already operating in the red. Ford And Jam already have billions, hundreds of billions of debt and they cannot afford to drop even the single Dollar on these cars.

They're already losing money on these cars as it is because they can't make them cheap enough. They just don't know how they don't have the experience, they don't have the track record. They don't know how to make these cheap cars. EV Now here's the crazy part.

so Tesla is dropping the price. They definitely have the margins to to absorb it. but don't forget the volume makes up for these discounts. But an obvious choice in that scenario is do you want to grow unit volume? In which case, uh, you'll have to adjust prices downward Or do you want to grow at a lower rate or go steady is sort of a choice there.

Um, you know my inclination would be to still grow. You know as I mean my. My bias would be to say like okay, let's let's grow as fast as we can without putting the company at risk. And yes, obviously when you reduce prices, that margin that profitability is going to be heard.

You're not going to be making 24 again, at least not for a while. But guess what if your volume of sales actually goes up insanely, that's going to compensate for the reduction in margin. Now the question is, can't us to compensate? well I Think they can And let me show you why. Look, you have to understand what's going on here.

45 000 is basically now the price you have to pay for the Model Y. That's a very, very competitive considering the landscape Tesla is operating in now. This is also not just not waiting for the government, they're also considering what's to come. 2023 is about to be a very painful year.

There's a lot of bad things coming in 2023 for the economy. people are not going to be buying 65 70 000 cars like crazy like they did in 2019 2020. we all know that so well. Lyric and the Machi are going to stay very elevated in price and 4gm can't make enough of them.

anyways. Tesla actually has big plans for the Model Y and the Model 3, which means that at 45 000, a Model Y base is a very, very competitive car, which is going to increase sales actually way stronger and way faster than even the some of the more optimistic models I've seen lately. At 45k, it's a whole different ball game. It's actually a recession-proof strategy ahead of time, which the margins that we just talked about that 24 gross margin allows Tesla to do and does not allow Ford GM to do the same.

I Think it's going to propel sales absolutely insanely. And think about it this way: Tesla is already growing at 40 per year on sales, at least on deliveries in a market that's gone down eight percent. This I think also did a little 4D chess move here that nobody actually talks about I think Tesla waited to do these price Cuts They waited until Berlin was actually operational, They waited until Berlin was actually ramped up and they waited for China to get out of zero covet policy so they can actually produce all this new demand. There's no doubt in my mind that at forty five thousand dollars, the model Y is going to sell like hot cakes.

Now, if you can't deliver the cars, if your factors are not there to give you the bandwidth, there's no point in doing this. I Think now that we've seen that Germany is actually online, the China's going back online. Tesla can actually produce these cars. So now they're dropping the price to actually accommodate that.

Now the crazy part is they're gonna have the government subsidized part of it because them dropping the price by about you know thirteen thousand dollars is gonna be matched by the government, Giving the you know, the purchases another seven and a half thousand dollars. That means that this is that forty five thousand dollars is gonna be offset at least partially by the government. Not bad at all. Now this is a classic example when the government tries to screw Tesla and screw them out of their you know EV credit and then your sister says, well, you know what, you didn't like us in the front door we're gonna come in through the window But having said that, I don't know what the stock market is going to do I don't know what the share price is going to look like for the next year or two? Who knows, we're going into a very difficult year I Don't know, but guess what? I Couldn't care less as a long-term investor I Know that the fundamentals are going to beat out the market no matter how many embarrassing, weird, strange stuff Elon tweets about.

Okay, this is just my opinion. Let me know below if you agree with me. if you disagree with me, see you next video. Gerbert Kowaski.