Elon Musk has a bigger problem than Twitter

• Tesla price cuts are "not a good sign," Wedbush analyst Dan Ives said.
• The automaker is advertising a $7,500 credit on Model 3 and Model Y vehicles.

Tesla's doubling of discounts this month on its most popular vehicles is the latest sign of trouble for the electric-vehicle maker.

While the rest of the automotive industry holds back on discounts for the third holiday season in a row, Tesla is lathering on the deals. Industry analysts say that's a sign Tesla is battling an inventory backup as demand for its all-electric vehicles cools.

"The price cuts are not a good sign for the holiday season," Dan Ives, an analyst for Wedbush Securities, wrote in an email.

Tesla's discounts are especially troubling when compared to the discipline other car companies are showing on mark-downs and other incentives at this time of year, said Ivan Drury, an automotive retail analyst for car-shopping website Edmunds.

"Everyone else is essentially still selling out without having to pull any levers – and still charging over MSRP," Drury said. "Tesla having such a sharp turn to discounts so suddenly and so soon after raising prices earlier this year – it doesn't signal confidence."

Tesla's website advertised on Thursday a $7,500 credit for all Model 3 and Model Y vehicles delivered before the end of the year, a doubling of the $3,750 credit offered on the same vehicles earlier this month. The discounts are a rare move for Tesla, which had instituted a series of price hikes in the last few years, citing supply chain disruptions and inflation.

Tesla long resisted traditional auto industry discounts as its ramped up production and customers clamored for its vehicles. Musk's EV maker has also enjoyed an early-mover advantage in the last several years as one of the only sellers of all-electric vehicles in the US.

More competitors entered the market in 2022, from fellow startups like Rivian and Tesla and from legacy car manufacturers like Ford, GM and Hyundai. And without the $7,500 federal tax credit, which expired for Tesla in late 2019, many first-time EV buyers are considering other brands over Tesla.

Tesla's vehicles could qualify for tax credits again under new rules spelled out in the massive climate bill passed this summer, but the US Treasury Department this week pushed back enforcement of these new requirements until March. That means would-be Tesla buyers who were holding off until January may not be waiting for spring.

Analysts also worry that Musk's series of gaffes as Twitter owner and CEO are damaging the Tesla brand. Some reservation-holders have tweeted their cancellations in the last several weeks.

This all comes on top of a plummeting stock price, with some disgruntled Tesla investors worrying the EV company is essentially operating without a CEO while Musk focuses on Twitter.

"Very negative spiral happening on the Tesla story," Ives wrote in his email.