Why Is Tesla So Expensive?

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Although electric cars are better for our wallets in the long term. Tesla, in particular, is a costly car to buy upfront, but why?

In our guide below, we’ve explored more about this luxury car brand and some reasons why it has such a high price tag.

Table of Contents

    Is Tesla Considered A Luxury Car Brand?

    When most of us hear Tesla, we think of luxury, along with the likes of BMW and Mercedes.

    Tesla makes their cars with luxury features. Some to name are self-driving, entertainment streaming, sentry mode, and more.

    When you compare Tesla to other luxury car brands, they have more technological features which make them stand out.

    There is no actual definition of a ‘luxury’ car brand. Most would think nice interiors, innovative tech features, and performance capabilities, all which Tesla has.

    9 Reasons Why Tesla Is So Expensive

    The fancy features and cool interior aren’t the only reasons Tesla costs so much. We’ve listed nine important reasons below.

    The Tesla Brand

    Tesla is more than an automaker. It’s a luxury brand and was one of the first global companies to develop a successful electric car brand.

    This alone allows Tesla to market itself and its cars at luxury prices. Tesla was estimated to have a brand value worth $66.7 billion in 2023.

    But, in recent years Tesla’s brand reputation has dipped. Now 62nd in reputation compared to 12th in 2022 as shown in the recent Axios Harris poll, putting other auto motives like Toyota and RM ahead.

    Tesla does not spend money on advertising, only research and development. To increase brand reputation, we could see Tesla spending a little more on advertising in the future.

    Supply & Demand: The Green Energy Movement

    Tesla has a high demand but a limited supply, this means they can increase the prices of their cars.

    Most of their factories are overseas and can only produce a limited amount of cars at a time. So, a backlog of orders builds up.

    The demand for Teslas is high due to their design and eco-friendly electric system which doesn’t use gasoline. The trend towards the green energy movement in reducing carbon emissions makes EV’s like Tesla more popular.

    Not to forget, the cars are also high-performance and quiet, even at high speed. Plus, with prices of gasoline, more people are looking for cheaper alternatives to fossil fuels.

    Battery Costs

    The batteries are what makes Tesla cars so expensive upfront. Tesla is putting a lot of research into cost-effective ways for electrical storage.

    Tesla has shown efforts in cost reduction. For example, in 2016-2019, their battery costs decreased from $230 to $127 per kilowatt-hour.

    Tesla released limited information about the costs of batteries in 2023, but it’s estimated to be at 153KwH an hour. Costing between $12,000 to $13,000 for the battery itself.

    Tesla’s EV battery costs are estimated to be 20% less than the industry average.

    Advanced Proprietary Technologies

    Tesla doesn’t hold back on cutting-edge features. It makes them unique and attracts a high price tag.

    These advanced features include its touchscreen, self-driving system, and entertainment features.

    They invest billions of dollars each year into developing their cars. In 2020, for example, they spent $2984 on research and development for every car produced. They spent the least on advertising.

    As you can see in the data presented on stockapps.com, Tesla spends the most on R&D in comparison to top car brands like Ford, RM, and Chrysler. In 2022, Tesla’s R&D spending increased to almost 3.1 billion USD.

    The add-ons and research are costly which also contributes to the expensive price.

    High Build Quality

    Tesla does not cut corners when it comes to the materials they use and the quality. The cars have a life expectancy of over 500,000 miles and are built to last.

    These high-quality materials must be tested and researched, which adds to the cost.

    For example, Tesla’s bodies come from lightweight carbon fiber. This is layered between a sandwich of glass and polypropylene which is expensive to make. It’s all then coated in epoxy resin to keep it durable.

    Government Policies

    Tesla’s prices are high when you factor in the tax credit cost too. The US government has a $7,500 tax credit on these EVs to encourage consumers to buy them. Promoting the green clean energy movement.

    But, this increases the demand for specific models and the price. Only Teslas priced at a certain amount of $55,000 or less are eligible for this too. Currently, the Tesla Model 3 and Y are.

    World’s Safest Cars

    Tesla’s one of the world’s safest cars and is 2.5 times safer than the average car. Every model has a 5-star rating from the Highway Traffic Safety Administration (NHTSA).

    These safety features, like the autopilot and autosteer, operate with cutting-edge technology. They are expensive to test and make and thus increase the price.

    For example, in the 2022 update, Tesla invested into developing its seatbelts. The seat belts now tighten the tension when it predicts a collision, thanks to its advanced camera system

    Advanced Hardware

    The hardware installed into Tesla costs money. For example, the Tesla hardware 4.0 self-driving system will have the latest generation AI. There is no other car brand which has shipped hardware related to full self-driving technology.

    These computer systems need money to develop with the latest technology. This is why Tesla invests billions into their research and development.

    All of Tesla hardware development is gathered in-house too. This gives them an advantage over other brands who rely on third-party suppliers.

    Free Charging Stations

    Any Tesla owner can charge their car at all of Tesla’s supercharging stations. On average, this would cost Tesla 0.28 per kWh.

    This provides free charging to Tesla users but is factored into the costs of the cars, contributing to their high prices.

    Tesla has around 45,000 plus superchargers. This is a large amount in comparison to ChargePoint and Electrify America.

    Electrify America has a fast charging system like Tesa’s superchargers but are still growing their network. ChargePoint has more chargers than Tesla but aren’t as fast.

    This gives Tesla the upper hand when it comes to charging their EV’s.

    What Tesla Model Is The Most Affordable?

    The Model 3 is the cheapest of all the Tesla models, starting at around $42,990, the second most affordable is the Model Y.

    You should consider the extra options, too, these can take your Tesla well above $60,000.

    Can You Negotiate The Cost Of A Tesla?

    For those of us on a budget with a dream of buying a Tesla, you, unfortunately, can’t negotiate the price of one. It is a fixed price only.

    Is It Cheaper To Own A Tesla Or Regular Car?

    The prices of Tesla’s costs much more upfront than a regular gas car does.

    These electric cars are cheaper to run and charge in the long run since you don’t have to pay for fuel.

    Our Verdict

    Tesla is a luxury car brand becoming one of the first successful EV car brands to make a reputation in the automotive market.

    Although expensive, these cars are worth the price tag. With premium features, advanced hardware, high-quality materials, and a unique design.

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