Tesla Reduces Prices On Model S and X Amid Stock Slump
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Faced with a slumping stock price and questions about demand for its vehicles, Tesla has lowered the U.S. base prices of its two most expensive models. The company on Monday cut $3,000 from the price of the Model S sedan and $2,000 from the Model X SUV. Tesla said in a statement that it periodically adjusts prices and available options like other car companies. The decreases offset price increases from a month ago when Tesla offered longer battery range and added a new drive system and suspension. The statement didn’t say if slowing sales influenced the decision.
The Model S now starts at $71,250 while the X starts at $71,950. Both prices don’t include federal and state tax credits.
The moves come as Tesla’s stock is under pressure and has at times dropped below $200 per share. Several analysts have questioned whether the company can sell enough cars to cover its expenses without dipping into cash reserves.
Shares traded Tuesday afternoon at $205.62, up slightly from Monday’s closing price. They are down more than 38 percent so far this year, cutting the company’s market value more than $20 billion to $36.5 billion. On Monday the shares hit their lowest point since late 2016.
Tesla said in a statement that the reductions are about 2% to 3% on the S and X. The company last week raised the price of its top-selling Model 3 by $400, pushing the base price to $35,400. “By any reasonable standard, these small changes are not newsworthy,” the company said in a statement.
“By any reasonable standard, these small changes are not newsworthy,”
On Monday Wedbush analyst Daniel Ives wrote in a client note that he has concerns about Tesla’s growth prospects and underlying demand for the Model 3 during the coming quarters.
Ives called Tesla a “code red” situation. “We have continued concerns around Tesla’s ability to balance this ‘perfect storm’ of softer demand and profitability concerns, which will weigh on shares until Musk & Co. prove otherwise in terms of delivering solid results over the coming quarters,” Ives wrote, referring to CEO Elon Musk.
Palo Alto, California-based Tesla said last month it lost $702.1 million in the first quarter, among its worst quarters in two years. Sales tumbled 31% in the period. Musk predicted another loss in the second quarter but said Tesla would be profitable again by the third quarter.
In January, the automaker cut its prices by $2,000 per vehicle, acknowledging that the pending expiration of a $7,500 federal tax credit for its electric cars will hurt sales. The credit is gradually being phased out for Tesla by the end of the year.
Questions & Answers
Q.Why did Tesla reduce the prices of its Model S and Model X vehicles?
Why did Tesla reduce the prices of its Model S and Model X vehicles?
The company reduced prices amid a slumping stock price and questions about demand for its vehicles. This move followed price increases a month prior, which coincided with offering longer battery range and new drive systems.
Q.What were the new starting prices for the Model S and Model X after the reductions?
What were the new starting prices for the Model S and Model X after the reductions?
After the price cuts, the Model S now starts at $71,250 and the Model X starts at $71,950. These figures do not include federal and state tax credits.
Q.What financial performance did Tesla report in the first quarter?
What financial performance did Tesla report in the first quarter?
Tesla reported a loss of $702.1 million in the first quarter, one of its worst in two years. Sales also tumbled by 31% during that period.
Q.What is the current state of Tesla's stock price and market value?
What is the current state of Tesla's stock price and market value?
Tesla's shares traded at $205.62, down over 38 percent this year. This has cut the company’s market value by more than $20 billion, bringing it to $36.5 billion.
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