Tesla is cutting the price of its Model S by $3,000, or 4%, a move observers believe will help prop up sales as a growing list of competitors enters the battery-electric vehicle market.
The Model S Long Range will now start at $71,990 in the U.S. Tesla announced a similar reduction in China, where it last month also trimmed the price of the Model 3 sedan by 8%, with a base version now starting at $36,805.
Tesla sales hit an all-time record during the third quarter – though Wall Street investors weren’t impressed, the numbers missing the more aggressive targets set by industry analysts. The automaker is pushing for even higher sales during the October-June quarter in a bid to meet its original goal of delivering 500,000 vehicles for all of 2020. And CEO Elon Musk has a lot riding on that push – as much as $3 billion.
(Tesla CEO Musk tells employees that 500K target for 2020 is doable.)
That’s the potential payout the South African-born executive stands to take home, the latest in a series of 12 tranches the Tesla board laid out for him, each depending on the EV maker meeting specific market capitalization, revenue and profit goals.
Musk told Tesla employees last week the company has a good shot of reaching the 2020 sales goal after already meeting its market cap target. But it would require jumping from the 139,300 vehicles delivered between July through September to 182,000 during the final quarter, a hefty 30% increase.
In reality, it’s likely to be the company’s two newest – and more mainstream products – the Models 3 sedan and Y SUV that make or break that goal, but Tesla wants to ensure that demand for the older and more expensive Models S and X don’t drop off. Both have been on the decline during the last few years.
Tesla already cut the price last May by $5,000 for the Model S Long Range Plus.
(Tesla hits quarterly deliveries record but Wall Street is not impressed.)
Other versions of the sedan will get the $3,000 discount, the price of the Model S Performance edition dropping to $91,990 from $94,990. There’ll be no change in the previously announced price for the upcoming Tesla Model S Plaid, however. The long-rumored super high-performance version was formally confirmed during Tesla Battery Day last month and will start at $139,990.
Separately, Tesla announced an 8% reduction in the base price of the Model 3 earlier this month. Some Model 3 variants will see prices drop by as much as 15%.
During the Battery Day event, CEO Musk made it clear that the high price for battery-electric vehicles remains an impediment to broader adoption of the technology. He promised to introduce a new entry model carrying a base price of around $25,000 within the next three years, Tesla counting on new battery manufacturing processes it believes could cut costs by more than half.
Tesla also has to worry about the growing competition entering the BEV market. Volkswagen will start selling its new ID.4 – a direct competitor to the Model Y – later this year, with a base price of $41,190. Company officials said they plan to introduce a significant less expensive version in two years, once production is transferred to the VW assembly plant in Tennessee. Meanwhile, even before Ford begins sales of the Mustang Mach-E by year-end it last week announced pricing will drop by as much as $3,000 for its own Model Y alternative. The base model now will begin at $43,995.
(Tesla speaking truth about its power at Battery Day.)
Ford and VW have a key advantage over Tesla: up to $7,500 in federal tax credits for buyers. Tesla lost those incentives at the beginning of 2020 after hitting a sales threshold set by Congress.
