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Tesla cuts prices on all models by $2,000 to offset reduction in federal tax credit

Key Points
  • Tesla announces $2,000 price cuts on all of its models.
  • The $7,500 federal tax credit for electric cars was cut in half as of Tuesday.
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Tesla is cutting the prices on all of its models by $2,000 to help offset a reduction in federal tax credits for drivers who buy electric vehicles.

The $7,500 federal tax credit for electric cars was cut in half as of Tuesday.

The company announced the price cut Wednesday as it released delivery results for the fourth quarter that disappointed investors and sent shares south by more than 9 percent.

Tesla said it made the move to soften the impact of falling federal tax credits. But some bearish investors are likely interpreting it as a move to stimulate demand, said Wedbush analyst Dan Ives.

"It was a move that was within the realm of possibility, but it caught investors off guard," he said.

A tent is seen at the Tesla factory in Fremont, California, U.S. June 22, 2018.
Reuters | Stephen Lam