Tesla offers discounts in Canada/Mexico, raising demand concerns

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

The move comes just after Tesla increased the year-end discount to $7,500 in the neighboring US.

Tesla refers to the discount as a “credit” on their site, though the accompanying “Learn More” link merely describes the specifics of the recently announced supercharger credit, available since December 15, and omits any specifics about the credit:

Tesla is offering free Supercharging credits* — up to 10,000 kilometers of driving—for 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 in the month of January 2023 and will remain valid for a period of two years from your delivery date.

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

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

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

In the US, this discount was largely thought of as a response to changing EV tax incentives. It had previously been expected that Teslas would qualify for $3,750 in EV tax credits next year due to the Inflation Reduction Act, but the Treasury announced Monday that they are delaying new rules, which means Teslas will now qualify for $7,500 in tax credits at least until some time in March. As a result, buyers might delay purchase for a few 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 do not have a similar tax credit change coming at the start of the year, so the discount in those territories must not be associated with that. Which means this could be a signal that Tesla sees a less-crowded order book than usual in this holiday season, and needs to spur interest by dangling a rare carrot in front of buyers.

Tesla often has end-of-quarter and end-of-year pushes for deliveries, shifting employee focus to delivering cars for the last few weeks of a quarter in order to finish out strong with high numbers. The company has stated for years that they would like to stop doing end-of-quarter delivery pushes, but that effort never really materialized and the company continues the practice basically every quarter.

These pushes usually materialize in the form of an all-hands motivational e-mail (with gratuitous use of the word “hardcore”) from CEO Musk, but he’s a little distracted from Tesla at the moment. Tesla also occasionally offers perks like free supercharging 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 their vehicles to motivate buyers to come in.

Tesla vehicles have received several price increases over the last year, likely due to increased supply chain costs and generally soaring EV demand overall. With EV supply being lower than demand, prices of many EVs have gone up.

But the auto market is finally starting to stabilize in the last few months, with new and used car prices starting to flatten out from their previous upward trend.

So this new discount doesn’t make up for this year’s price increases, but at least it’s a reversal of the recent trajectory of Tesla prices. That said, it is only temporary – or maybe it’s a sign that Tesla’s price increases have gotten a little overzealous and the company may need 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 original $3,750 US discount, Tesla has never really had trouble with demand, and has never needed to offer discounts as a result. He mentioned that his sign for waning Tesla demand would be when Tesla starts offering discounts.

The US discounts seem like a response to tax credit changes, and could be explained away thusly.

But this discount can’t be explained away as a response to changing government incentives. It doesn’t apply to Europe or Asia, only to North American cars, which incidentally are all produced in the same North American factories. It seems likely that Tesla may have too much NA inventory and wants to get some of it off their hands, and turned into cash, before it shows up on balance sheets at the end of the fiscal year.

Or maybe Tesla wanted to align pricing 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 amid falling popularity for the brand due to CEO Elon Musk’s recent shenanigans.

This could be a sign that Tesla demand, which has consistently risen at incredible rates for so many years, might at least be rising less quickly than it previously has.