Tesla's back-to-back price cuts bring sticker on US Model S below $70,000

15 October 2020 - 09:41
By Reuters
Tesla has reduced the price of its Model S in the US.
Image: Supplied Tesla has reduced the price of its Model S in the US.

US electric vehicle maker Tesla Inc cut the price of its Model S “Long Range” sedan in the US to $69,420, its website showed, after a tweet flagging the cut earlier on Wednesday from CEO Elon Musk.

The cut is Tesla's second this week for the high-end sedan, after a 4% cut to $71,990 (roughly R1,191,682) on Tuesday.

Tesla shares closed 3.3% higher at $461.30 (roughly R7,671) on Wednesday and were little changed in after-hours trade.

The company also on Tuesday reduced by 3% the price of its Model S in China, where it had previously cut the starting price of its Model 3 sedan.

The starting price for Model S is now a thousand times that of a pair of red satin shorts that Tesla started selling in July for "$69.420" to poke fun at the company's naysayers.

Tesla introduced its Model S in 2012, but in recent years the car has faced competition from the automaker's less expensive, mass-market Model 3 sedan, launched in 2017, which currently starts at $37,990 (roughly R631,595). The Model S makes up only around 5% of Tesla's unit volume, said a Credit Suisse analyst in a client note on Wednesday.

The analyst said the Model S price reduction was likely in response to price cuts by electric vehicle start-up Lucid Motors, which sells its luxury sedan Air model at a starting price of $69,900 (roughly R1,162,891). That includes a $7,500 (roughly R124,773) US government electric vehicle tax credit, for which Tesla vehicles are no longer eligible.

The price cuts also come as competition in the electric vehicle market — long dominated by Tesla — heats up, with several automakers launching new electric vehicles next year.

Germany's Daimler AG is scheduled to release an electric version of its Mercedes-Benz S-class luxury sedan, the EQS, next year. Analysts expect the EQS to be significantly more expensive than the Model S, however, with the latest version of the petrol-powered S-class retailing at more than €100,000 (roughly R1,954,788).