Tesla is dropping the prices of its vehicles for the second time this year in the company’s effort to make its electric cars more affordable and drive demand.
- The Tesla Model S now starts at $89,990, a 5.3% decrease, and the Tesla Model X now starts at $89,990, a decrease of 9.1%.
- The plaid version of the company’s Model S has been reduced $26,000, while the Model X plaid is dropped $29,000, starting at $109,990.
- Tesla’s stock is down about $1.97 Monday, trading at $195.82, but it has climbed 61% this year, mostly due to the price cuts after falling 65% in 2022.
Why it’s news
The electric-vehicle market has been getting more competitive—with Ford, GM, and Toyota releasing non-gas-powered models and eating into the market share of industry leader Tesla. Tesla stock had dropped 65% last year and Zero-COVID policies in China hurt production, which slowed sales.
As a result, EV forerunner Tesla has announced another round of price cuts after the initial price slash this year sent demand booming.
Tesla has been dropping its EV prices over the last few months. The Model 3 Sedan is now $4,930 less than the average new vehicle sold in the U.S., and the more expensive Model Y sport utility vehicle had a $13,000 price drop earlier in the year.
Tesla owner Elon Musk says that making EVs more affordable has sent the demand for cars soaring, and he plans to continue to cut the prices to keep demand skyrocketing.
“We found that even small changes in the price have a big effect on demand, very big,” Musk said at Tesla’s recent investor day.
The initial price drops were for Tesla’s cheaper and more popular vehicles, such as the Model 3 sedan. The newest price drop is for the more expensive Model S and X, which were well above the $100,000 mark.
The price cut to the less costly models helped boost demand, according to Musk, and now he is attempting to do the same with the more expensive models by dropping the prices with those as well.
The Model S and X were just over 5% of Tesla’s vehicle deliveries last year, so the price cuts will likely not make a huge difference, but now that the vehicles are dropping several thousand off the price tag, the deliveries could go up significantly.
While EVs are dropping in price, gas-powered cars are doing the opposite. The average cost of a new vehicle has risen more than $10,000 since the start of the pandemic, to $47,920 in January, according to data from Bloomberg.
The rise in prices is mostly due to the shortage of computer chips, and other shortages brought on by shutdowns during the pandemic.
Tesla continues to build more factories, and other EV brands are doing the same. Many experts think that if demand for Tesla begins to taper off as other EVs debut, then more Tesla discounts could be in store for the future.