A drivers uses a Tesla Supercharging station in Corte Madera, California, US, on Thursday, March 2, 2023.
David Paul Morris | Bloomberg | Getty Images
Tesla cut prices on its two costliest models within the U.S., the Model S and Model X, in a renewed bid to stoke demand for its cars with aggressive discounts.
The Tesla Model S now starts at $89,990, based on Tesla’s website, down around 5% from where they were priced previously. The Model X, meanwhile, starts at $99,990, which marks a 9% reduction.
For the high-end “Plaid” versions of the Model S and Model X, automotive buyers can now expect to pay $109,990. That is down 4% for the Model S Plaid, and eight% for the Model X Plaid.
Tesla shares were up around 0.6% in U.S. premarket trading Monday.
It follows a series of aggressive discounts from the corporate in recent months. In January, Tesla reduced prices of its recent cars by as much as 20%, making the vehicles more cost-effective and sure eligible for federal tax credits within the U.S.
The most recent price reduction is probably going unrelated to EV tax credits introduced in President Joe Biden’s Inflation Reduction Act, as they continue to be above the $55,000 threshold to qualify for as much as $7,500 toward purchasing recent vehicles.
The pace and frequency of Tesla’s price adjustments goes beyond what established automakers have attempted within the industry, where the bottom price of a vehicle in inventory continues to be known as a “sticker price.”
EV price battle
This has ignited a price battle amongst carmakers competing to lower their prices in a bid to lure in additional customers and drive sales. After Tesla’s January price reductions, Ford slashed prices on its electric Mustang Mach-E crossover by as much as 8%.
Musk has shifted Tesla’s focus of late to bringing prices all the way down to spur demand for its products.
On the firm’s fourth-quarter earnings call in January, he said Tesla was seeing orders almost doubling the speed of production. “These price changes really make a difference for the common consumer,” Musk said on the time.
EV arms race
“The value cuts Tesla has already implemented globally has catalyzed demand by 30% out of the gates as this latest price cut is one other smart move,” Dan Ives, managing director of equities at Wedbush Securities, told CNBC via email.
“That is an EV arms race playing out and Tesla has the margins to make price cuts and still be well above other automakers. On this economic cloudiness Tesla needs to tear the band-aid off and cut prices and the Street will like this.”
To make discounts of those proportions, Tesla might want to match them with production cost reductions. It is a goal the corporate has been pushing hard to realize, with efforts to chop down on certain spending in its supply chain already underway.
Last week, a Tesla executive said the corporate was developing an EV motor that will be built without rare earth metals — that are critical to the motors utilized in electric vehicles — citing the necessity to lower costs and environmental risks that accompany the mining of those minerals.
