Tesla Cuts Prices Again – The Effects of Price Reductions on Demand

Tesla has cut prices on its two most expensive models, the Model S sedan and Model X SUV, yet again. The base version of the Model S now sits at $89,990, a drop of around 5%, and the Plaid performance version slides to $109,990, down 4%.[0] The base long-range version of the Model X SUV is now available for $99,990, a cut of around 9%, and the Plaid version slides 8% to $109,990.[1]

The latest round of price reductions comes on the heels of a series of cuts Tesla made across its lineup in January.[2] CEO Elon Musk said during the company’s investor day that demand for Teslas was “indistinguishable from infinite,” and that the goal was to make the cars “affordable to as many people as possible.”[2]

The 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.[3] Tesla’s recent price reductions have made their cars cheaper relative to the average price of a new vehicle in the US than ever before.

However, the price cuts have not been without controversy. Some customers who purchased cars just before the discounts were introduced voiced their displeasure, citing the apparent loss in value they precipitated.[4] Others have gathered at Tesla showrooms and distribution centers in China to demand rebates.[4]

The price tags may be falling, but Tesla stocks were down 2.1% Monday afternoon, trading at roughly $194 a share.[5] The US-listed shares of the electric-vehicle maker that’s backed by Warren Buffett have declined 14% since the start of February, underperforming Tesla’s 9% advance.[6] As for other EV makers, a gauge of global EV makers fell 9% over the same period.[7]

In the end, it remains to be seen what the long-term effects of these price cuts will be. While Tesla may be aiming to make their cars as affordable as possible, only time will tell if the cuts will have the desired effect of boosting demand.

0. “Tesla again cuts EV prices in US” Greatandhra, 6 Mar. 2023, https://www.greatandhra.com/articles/special-articles/tesla-again-cuts-ev-prices-in-us-127723

1. “Tesla Reduces Prices of Model S and Model X; Significant Discounts for Plaid Variants” Not a Tesla App, 6 Mar. 2023, https://www.notateslaapp.com/news/1244/tesla-reduces-prices-of-model-s-and-model-x-significant-discounts-for-plaid-variants

2. “Tesla Slashes Model S and X Prices Amid Softening Demand” ExtremeTech, 6 Mar. 2023, https://www.extremetech.com/extreme/343567-tesla-slashes-model-s-and-x-prices-amid-softening-demand

3. “Tesla Model S and X prices slashed for the second time this year” Autoblog, 6 Mar. 2023, https://www.autoblog.com/2023/03/06/tesla-model-s-x-price-cut/

4. “Tesla reduces prices of Model S and Model Y” Quartz, 6 Mar. 2023, https://qz.com/tesla-cut-the-price-of-its-most-expensive-models-in-the-1850191696

5. “Tesla cuts Model S and Model X prices in the U.S. to stoke demand” CNBC, 6 Mar. 2023, https://www.cnbc.com/2023/03/06/tesla-cuts-us-model-s-and-model-x-prices-between-4percent-and-9percent.html

6. “BYD’s $18 Billion Rout Shows Fallout of Tesla Price War in China” Bloomberg, 6 Mar. 2023, https://www.bloomberg.com/news/articles/2023-03-06/buffett-backed-byd-s-18-billion-rout-shows-tesla-s-price-war-heats-up-in-china

7. “Tesla’s China price war sparks $18 billion BYD rout” Detroit News, 6 Mar. 2023, https://www.detroitnews.com/story/business/autos/2023/03/06/teslas-china-price-war-sparks-18-billion-byd-rout/69976336007/