Tesla is cutting prices yet again, seeking to boost sales and pump up its top line.
Both the Model X and Model S luxury Electric Vehicles are getting a price makeover, according to the company’s website. The Model S base version is getting a price reduction of about 5%, to $89,990, while the Plaid performance version will see its price drop about 4% to $109,990. Meanwhile, for the Model X SUV, the base long-range version is getting a price reduction of about 9%, putting it at about $99,990, while the Plaid performance version will see its price fall 8% to $109,990.
Normally the Model X versions have been priced higher than the equivalent Model S versions of Tesla’s top-end vehicles, however now the plaid versions of both vehicles will be priced the same. In addition, this is the first time in two years a Model S is available for a price of about $90,000.
These vehicles do not qualify for the tax credits under the Inflation Reduction Act which many EV makers use to encourage sales, but they are targeted toward a much more affluent purchaser than the cheaper vehicles Tesla sells. However even the most affluent are price sensitive, so these price cuts could be expected to spur sales.
Tesla CEO Elon Musk had referenced this at Tesla’s Investor Day last week when he said, “The desire for people to own a Tesla is extremely high. The limiting factor is their ability to pay for a Tesla.”
Tesla has been cutting prices aggressively lately in an effort to boost demand, as inflation has strained pocketbooks and fears of a global economic slowdown have hammered consumer sentiment. Now they are bringing that strategy to their more high-end vehicles, even though those vehicles represent a smaller proportion of their overall sales.
Last quarter, there were only about 17,000 deliveries of the Model S and Model X across the entire globe, compared to almost 420,000 Model 3 and Model Y units delivered in the same period.
However the price cuts have been deemed a smart move by analysts, who note that competition is high in the elite EV segment. The Model S competes against such vehicles as the Porsche Taycan EV sedan, the Mercedes-Benz EQS sedan, the Lucid Air sedan, and BMW’s upcoming i7 EV sedan.
Analysts also note Tesla is looking at plans to shift production procedures to produce long-term cost savings which could produce even more profit in the future, even with these reduced prices.
At the Investor Day, Tesla noted it is continually reassessing its manufacturing procedures. As an example, it pointed out how it began with the Model Y, where the company made the battery a structural part of the vehicle’s floor. Tesla noted that cut the production costs by 50%, and shrank the factory footprint by 40%, and now that will be an integral part of the new next-generation 3 platform design.
Some analysts speculate these price reductions in the higher-end tier of Tesla’s product line may mean such cost cutting changes to the production line either already have occurred for these models, or they will shortly.
