Tesla offers discounts in Canada/Mexico, raising demand concerns

Tesla is now offering a $5,000 CAD/$74,750 MXN credit for Model 3 and Model Y vehicles purchased in Canada and Mexico before the end of this year. This is a rare instance of Tesla offering discounts and could be a sign of softening demand in North America.

The move comes on the heels of Tesla increased the year-end rebate to $7,500 in the contiguous US.

Tesla refers to the discount as a “credit” on their site, although the accompanying “Learn More” link simply describes the specifics of recently announced compressor creditavailable from December 15th and omits any credit details:

Tesla is offering free Supercharging credits* — up to 10,000 kilometers of driving — to customers who take delivery of a new Tesla vehicle between December 15 and December 31, 2022. Free Supercharging will be credited to your Tesla account during the month of January 2023 and will remain valid for a period of two years from the date of delivery.

But inventory car prices do not show this credit as already applied as seen in the screenshot below:

The average car, at $59,990 CAD, shows the same price as a custom-configured car with the same base model specifications. So inventory cars can expect an additional $5,000 CAD discount beyond the listed price on the website, but we don’t know exactly how this “credit” will be applied. You’ll have to ask your Tesla salesperson for specifics.

The discounts in Canada and Mexico are almost identical to Wednesday’s extra discount in the US. Both convert to roughly $3,750 USD, which is the amount Tesla raised the discount by in the US.

In the US, this rebate was largely seen as a response to changing tax incentives for EVs. Teslas were previously expected to go for $3,750 in the EV tax credits next year due to Inflation Reduction Actbut the Treasury announced on Monday that they are delaying new rules, meaning Teslas will now qualify for $7,500 in tax credits at least until sometime in March. As a result, buyers can delay a purchase for several weeks to get new tax credits, so if Tesla wants to sell cars now, it makes sense to offer a temporary discount.

But Canada and Mexico don’t have a similar tax credit change at the beginning of the year, so the discount in those territories shouldn’t be tied to that. Which means it could be a signal that Tesla is seeing a less crowded order book than usual this holiday season and needs to stimulate interest by putting a rare carrot in front of buyers.

Tesla often has end-of-quarter and end-of-year delivery pressures, shifting employee focus to delivering cars in the last few weeks of the quarter to finish strong with high numbers. The company has said for years that it would like to stop doing quarter-end delivery pushesbut this effort never materialized and the company the practice continues basically every quarter.

These urges usually materialize in the form of an all-hands-on (with gratuitous use of the word “hardcore”) motivational email from CEO Musk, but he’s a bit distracted by Tesla right now. Tesla also sometimes offers benefits such as free recharge to get customers in the door at the end of the year. But now we’re seeing a rare instance of Tesla offering discounts on its cars to motivate buyers to come in.

Tesla cars have received several price increases over the past year, likely due to increased supply chain costs and a generally growing demand for EVs in general. As the supply of EVs is lower than the demand, the prices of many EVs have risen.

But the auto market is finally starting to stabilize over the past few months, with new and used car prices starting to level off from their previous upward trend.

So this new discount doesn’t make up for this year’s price increase, but it’s at least a reversal of Tesla’s recent price trajectory. However, this is only temporary – or perhaps it’s a sign that Tesla’s price hikes have become a little overzealous and the company may have to correct in the opposite direction as a result of softening demand in North America.

Electrek’s Take

As Fred mentioned in his Take for Tesla’s initial $3,750 discount in the US, Tesla has never had a problem with demand and has never needed to offer discounts as a result. He mentioned that his sign of Tesla demand slowing down would be when Tesla starts offering discounts.

The rebates in the US appear to be a response to changes in the tax credit and can be explained in this way.

But this the discount cannot be explained as a response to changing government incentives. This does not apply to Europe or Asia, only North American cars, which by the way are made in the same plants in North America. It seems likely that Tesla may have too much NA stock and wants to get some of it out and turn it into cash before it shows up on the balance sheets at the end of the fiscal year.

Or maybe Tesla wanted to equalize prices across territories – but if so, then why no discount in Europe and why only $3,750 USD (equivalent) and not $7,500?

The move also comes in the middle declining popularity for the brand thanks to CEO Elon Musk recent shenanigans.

This could be a sign that demand for Tesla, which has been steadily growing at an incredible rate for so many years, may at least be growing more slowly than before.

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