Tesla has reduced the price of its most expensive US models for the second year in a row, further reducing the steep price increases that contributed to the slump in demand in 2022.
According to the company’s website, the starting price for the Model S has been lowered 5% to $89990 and the Model X cost has fallen 9% to $99990.
Tesla announced substantial price increases in 2021 and 2022 for many of its vehicles due to parts shortages, long waiting lists, and other factors. However, reverse course in January of this year because of weaker demand and increasing competition.
Its Model X’s starting price jumped from $99,000 to over $120,000 last year. This helped to support Tesla’s industry-leading profit margins, but also contributed to disappointing new vehicle delivery in the final months 2022.
Elon Musk , chief executive, stated last week that there was an immediate effect on sales by cutting prices in January in all markets. Most of Tesla’s models were affected. Tom Zhu is the head of Tesla China and also the executive responsible to the company’s global manufacturing facilities. He said that the price reductions had resulted in an increase in China’s market share, where Tesla has been faced with a lot of competition.
Musk spoke at Tesla’s inaugural investor day and claimed that Tesla’s demand was “infinite” for its vehicles. He also stated that affordability was the only thing that holds buyers back, but he didn’t address the negative impact of his earlier price hikes on sales.
Tesla stock fell more than 2 percent on Monday. Wall Street welcomed Musk’s aggressive price cuts to protect sales, even though it could mean losing profitability. Tesla hopes to be able take market share from other companies that are struggling to make profit from electric vehicle sales and has seen its shares rise 80 percent since the beginning of the year.
Musk shined a spotlight on the many initiatives Tesla has taken to reduce costs and improve the performance of its vehicles last week. These moves will allow Tesla to reduce its manufacturing costs by 50%, Musk claimed. This raises hopes for a lower-priced vehicle that will help it compete with growing competition.