Tesla has cut the prices of its most expensive models in the US for a second time this year, further unravelling earlier steep price increases that had contributed to a slump in demand in 2022.
The starting price of the Model S has been reduced 5 per cent to $89,990 while the cost of the lowest-priced Model X has come down 9 per cent to $99,990, according to the company’s website.
Tesla announced significant price increases for many of its vehicles in 2021 and 2022 in the face of parts shortages and long waiting lists, only to reverse course in January this year as weaker demand and rising competition ate into sales.
The starting price of its Model X jumped from around $99,000 to over $120,000 last year, helping to support Tesla’s industry-leading profit margins but contributing to disappointing new vehicle deliveries in the final months of 2022.
Chief executive Elon Musk said last week that a round of price cuts in January across all markets and most of Tesla’s models had an immediate impact in stoking higher sales. Tom Zhu, head of Tesla China and the executive responsible for the company’s global manufacturing plants, also said the price cuts had led to an increase in market share in China, where Tesla has faced a barrage of new competition.
Speaking at Tesla’s first investor day, Musk claimed that demand for Tesla’s vehicles was “infinite” and that the only thing holding buyers back was affordability, though he did not address the impact his company’s earlier round of price increases had on dampening sales.
Tesla’s stock price slipped more than 2 per cent on Monday, but Wall Street has welcomed Musk’s aggressive moves to cut prices to defend sales this year, even at the risk of eating into profitability. The shares have risen 80 per cent since the start of the year on hopes that Tesla will be able to take market share from rivals that are already struggling to make profits from electric vehicle sales.
Musk shone a spotlight last week on the many actions Tesla has been taking across its operations to lower costs while still improving the performance of its vehicles. The moves should enable it to cut the costs of manufacturing its next generation of electric vehicles by 50 per cent, he claimed, raising hopes for a new, lower-priced electric vehicle that will help Tesla fend off growing competition.
