California: Tesla slashed its Model S and X prices in the US for the third time this year in an effort to shore up flagging demand for its iconic electric vehicles.
CEO Elon Musk has vowed to chase volume over profit margins. The flagship Model S sedan now starts at $84,990, a $5,000 cut from the price last month. The Model X starts at $94,990, also a $5,000 drop.
The cuts come as the auto industry struggles with surging inflation and rising interest rates that are making new car purchases increasingly expensive. Tesla, which sells its vehicles directly to consumers, regularly tweaks its prices. The Austin, Texas-based company currently makes the Model S, X, 3 and Y.
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“Price really matters,” Musk said on the company’s January earnings call. “I think there’s just sort of a vast number of people that wanted to buy a Tesla car, but can’t afford it. And so, these price changes really make a difference for the average consumer.”
Tesla delivered 422,875 vehicles globally in the first quarter, but just 10,695 of those were the S and X.
Tesla trimmed the price of Model 3 sedans and Model Y sports utility vehicles by $1,000 and $2,000, and lowered the starting prices of two models to $41,990 and $49,900, according to its website. It also added a new version of the entry-level Model Y.
The US automaker, which cut prices in China earlier this year, has also triggered a price war in the world’s largest new-energy vehicle market. It shipped a total of 88,869 vehicles from the Shanghai factory in March, according to preliminary data released Tuesday by China’s Passenger Car Association.
A significant price disparity remains for the vehicles made in China, where a basic Model 3 starts at 229,900 yuan ($33,400) and a Model Y runs 261,900 yuan ($38,086).
While Tesla continues to outpace other automakers in global EV sales, it’s facing stiffer competition than ever before from China’s BYD Co., with analysts at BloombergNEF expecting the Berkshire Hathaway-backed manufacturer will challenge for the No. 1 spot this year.
Tesla will also need to pick up the pace to keep growing at the rates investors are used to. Last year, the company fell short of its target for a 50 per cent average annual increase in vehicle deliveries, expanding instead by 40 per cent. Its growth rate slipped to 36 per cent in the first quarter.
Tesla will report earnings on April 19.