Tesla slashing Model S, X prices for second time this year

Tesla reduced prices of its more expensive models again, days after Elon Musk said cuts earlier this year had piqued interest in the company’s electric vehicles.

The Model S and X now start at $89,990 and $99,990 in the U.S., down a respective 5.3 percent and 9.1 percent, according to Tesla’s website. The company lowered prices of the higher performance Plaid versions of each vehicle by 4.3 percent and 8.3 percent.

At $109,990, Plaid iterations of the S and X now cost $26,000 and $29,000 less than they did in early January.

Musk said last week that the desire to own Teslas was “indistinguishable from infinite,” and that demand will “go crazy” as the company makes its cars more affordable. Reducing prices of S and the X models again suggests those vehicles may have gotten less of a boost from cuts the company made across its lineup seven weeks ago.

“We found that even small changes in the price have a big effect on demand, very big,” Musk said during Tesla’s March 1 investor day.

Tesla stock has climbed 61 percent this year after plunging 65 percent in 2022.

The Model S and X were just over 5 percent of Tesla’s vehicle deliveries last year, so changing their pricing will have less of an effect on the company’s bottom line and EV market dynamics than adjusting the cost of higher-volume vehicles.

Still, the cuts are consistent with comments Musk and other executives made last week about squeezing expense out of how it designs, engineers and manufactures vehicles in order to unlock more demand.

“Tesla is sprinting in a global automotive marathon to cut costs, as they strive to be a global manufacturing champion that can give the company a sustainable competitive advantage,” said Joel Levington, a Bloomberg Intelligence credit analyst.

Tesla’s dynamic pricing is unique in the automotive world, where manufacturers typically only make changes to what they suggest their retailers charge from one model year to the next.

Reductions to the Model 3 and Y in January made those vehicles cheaper relative to the average price of a new vehicle in the U.S. than ever before.

The changes to the 3 and Y were at least in part driven by Tesla wanting those models to qualify for tax credits made available by the Inflation Reduction Act. After the Biden administration changed how it distinguished between passenger cars and sport utility vehicles in early February, thereby raising the price limit for Model Ys to be eligible for credits, Tesla bumped prices back up.