The Ripple Effects of Tesla’s Recent Price Cuts

My students generally love Tesla and Elon Musk. Some love Tesla because they appreciate that the car pollutes less than gas-powered vehicles. Others appreciate that Musk is really rich. Personally, I have mixed feelings about the man, but you cannot deny Tesla accelerated adoption of electric vehicles. All of that said, the company here will no doubt pique your students’ interest in a pricing strategy issue.

A couple of months ago, Tesla slashed prices up to 20% on its cars. This followed years of steady price increases, and due to its popularity, almost no price promotions. What might be fun to discuss in class, are the ripple effects of these price cuts. This article elaborates on the effects the price cuts had on recent Tesla buyers, future Tesla buyers, the brand image, competition, the EV market, investors, and even policy makers whose efforts drove the price cut in the first place.

The fun part here is getting students to think about these ideas. Some of the effects are not so obvious. This is a perfect opportunity for a short think, pair, share activity to break up a lecture on price. I will use think, pair, share and ask my students to think about how different constituencies might react to this price change. To get them thinking, I will leave a slide with the marketing strategy process planning model (see below) on the screen. The model will serve as a launching point for subsequent discussion.