Tesla slashes prices of high-end Model S and Model X EVs

Tesla is bringing out its price chopper again, this time at the higher end.

According to its website, Tesla has slashed the prices of both its Model S and Model X SUV luxury vehicles. The base version of the Model S drops around 5% to $89,990, and the Plaid performance version drops around 4% to $109,990. As for the Model X SUV, the base long-range version now sits at $99,990, a cut of around 9%, and the Plaid performance version slides 8% to $109,990.

Interestingly the base Model S now sits at around $90,000 for the first time in two years, and both Plaid versions of the vehicles now start at the same price, of around $110,000. Typically the Model X versions have cost more than the equivalent Model S versions of Tesla’s high-end vehicles.

While these models don’t qualify for the IRA (Inflation Reduction Act) tax credits, and are targeting a much more affluent buyer than Tesla’s cheaper vehicles, price sensitivity does matter for even those more well-heeled.

Tesla CEO Elon Musk said as much during last week’s Investor Day presentation. “The desire for people to own a Tesla is extremely high. The limiting factor is their ability to pay for a Tesla," Musk said.

Tesla has been dropping the hammer on pricing boost demand considerably, both here and abroad, and feels it is time to bring those demand levers to the high end — despite the fact that the Model S and Model X represent only a fraction of the overall sales for the brand. Last quarter Tesla delivered around 17,000 units of the Model S and X globally, whereas it delivered nearly 420,000 Model 3 and Y vehicles in the same time period.

Tough competition

That being said, price cuts at the highest end shouldn’t be a surprise given that the competition is very intense at those lofty levels. The Model S must compete against competition like the Porsche Taycan EV sedan, the Mercedes-Benz EQS sedan, the Lucid Air sedan, and BMW’s upcoming range topper, the i7 EV sedan.

And looking big picture, Tesla may begin to implement long-term cost savings on the production side to eke out more profit down the line, even at reduced consumer prices. At its investor day, Tesla said it is continually rethinking manufacturing — it started with the Model Y, with the battery becoming a structural part of the vehicle floor. Tesla said this type of design cut costs by 50% and reduced factory footprint by 40% — which will all be part of its upcoming next generation 3 platform design.

Tesla may bring (and likely already has in some areas) these design-derived cost improvements to its higher-end cars.

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Pras Subramanian is a reporter for Yahoo Finance. You can follow him on Twitter and on Instagram.

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