Tesla reduces the cost of some electric vehicles, for the second time
Tesla has reduced the prices of its most expensive models in the United States for a second time this year, reversing previous steep price increases that contributed to a decline in demand in 2022.
According to the company’s website, the Model S’s starting price has decreased by 5% to $89,990, while the Model X’s lowest price has decreased by 9% to $99,990.
In the face of parts shortages and long waiting lists, Tesla announced significant price increases for many of its vehicles in 2021 and 2022. However, sales decreased in January of this year due to weaker demand and rising competition.
The Model X’s starting price increased from approximately $99,000 to over $120,000 last year, supporting Tesla’s industry-leading profit margins but contributing to disappointing deliveries of new vehicles in the final months of 2022.
Last week, Tesla’s CEO Elon Musk stated that a series of price reductions in January for the majority of Tesla’s models and in all markets had an immediate effect on boosting sales. In addition, Tom Zhu, the executive in charge of Tesla’s global manufacturing plants and head of Tesla China, stated that the price cuts had increased Tesla’s market share in China, where it has been confronted with a torrent of new rivals.
Speaking at Tesla’s first investor day, Musk claimed that demand for Tesla vehicles was “infinite” and that affordability was the only thing holding buyers back. However, he did not address the impact that his company’s previous round of price increases had on sales.
Despite the fact that Tesla’s stock price dropped by more than 2% on Monday, Wall Street has welcomed Musk’s aggressive price cuts to protect sales this year, even at the risk of reducing profitability. In the hope that Tesla will be able to take market share from rivals who are already struggling to make profits from the sale of electric vehicles, the shares have increased by 80% since the beginning of the year.
Last week, Musk shined a spotlight on the numerous initiatives Tesla has taken throughout its operations to reduce costs while simultaneously improving vehicle performance. He asserted that the company should be able to reduce the costs of producing its next generation of electric vehicles by 50% as a result of the changes. This raises hopes for a new, lower-priced electric vehicle that will assist Tesla in fending off the competition that is growing.