Electric vehicle manufacturer Tesla has quietly reduced prices on its Model S and Model X vehicles, as well as its Full Self-Driving (FSD) software upgrades. The starting price for the base Model S dropped by $3,500 to $74,990, while the base Model X saw a price cut of $8,500 to $79,990. In addition, Tesla slashed the price of its FSD software by $3,000 to $12,000, down from $15,000 as reported by Electreck.
According to CEO Elon Musk, the motivation behind the reductions is to make Tesla vehicles more affordable and accessible to mainstream buyers. However, investors reacted negatively to the price cuts, interpreting them as a signal of underlying demand issues.
Tesla’s stock price took a hit following the announcement of lower prices across its lineup. While reduced prices will certainly capture the interest of some new buyers, they seem to reveal concerns about stagnating sales growth.
The price drops come just after the release of Tesla’s more affordable Model 3 sedan, which offers similar features and performance at a significantly lower cost. The Model 3 likely represents major competition for the pricier Model S and Model X. As such, the price drops for the flagship models and software upgrades may be an attempt to boost demand in the face of encroaching internal competition.
Tesla also continues to face questions regarding manufacturing quality and safety, including a recent major recall of Model S and Model X vehicles. For Tesla, boosting demand via price cuts comes with the risk of aggravating investors and projecting an image of desperation, despite leadership’s stated intent.
