Tesla Launches Cheaper Model of S and X Vehicles

Tesla continues to employ a strategic pricing approach to bolster its vehicle volume across its complete lineup, introducing more affordable iterations of its Model S and Model X electric vehicles. While the new vehicles exhibit a reduced price point, there is a strategic rationale behind these new offerings.

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The recently unveiled standard-range variants of the Model S and Model X are now accessible through Tesla's official website. The base model of the Model S commences at $78,490, whereas the standard-range Model X begins at $88,490—both representing a noteworthy $10,000 reduction compared to their previous counterparts. These vehicles are slated for delivery between September and October.

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Precisely, the standard-range Model S boasts an estimated driving range of 320 miles, while the Model X offers a range of 269 miles. In comparison, the base versions present extended ranges of 405 miles and 348 miles, respectively.

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Throughout 2023, Tesla has consistently adjusted prices, with the latest instance involving certain Model Y variants in China. While these price modifications have facilitated a remarkable surge in vehicle deliveries, with approximately 890,000 units dispatched in the first half of 2023—a 57% increase year over year—these adjustments have come at the expense of profit margins. Tesla's reported operating-profit margins contracted from 17% in the first half of 2022 to 10.5% in the same period of 2023.

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It's worth clarifying that these new releases don't merely constitute price reductions; they signify the introduction of novel vehicle versions that were previously absent from the market.

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There are several underlying motivations for expanding Tesla's product lineup to encompass shorter-range electric vehicles. One rationale pertains to evident market demand, possibly suggesting that Tesla drivers are relatively unaffected by range anxiety—the apprehension of being stranded without charging access.

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This lack of anxiety can be attributed to Tesla's extensive network of fast chargers, the largest of its kind in the U.S. The proliferation of charging infrastructure can diminish the perceived necessity for larger battery capacities. Moreover, fewer batteries integrated within a vehicle naturally contribute to a reduced electric vehicle price point.

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Another potential reason for Tesla's introduction of standard-range models could be an improved battery supply chain. Some standard-range models employ lithium-iron-phosphate (LFP) batteries, frequently sourced from China's Contemporary Amperex Technology Co Ltd (CATL). An augmented battery supply could potentially lead to lower battery costs. However, Tesla has not provided commentary on these new vehicle iterations or the status of its battery supply.

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In premarket trading on Tuesday, Tesla's stock witnessed a marginal 0.7% decline, reaching $238.10. In parallel, S&P 500 and Nasdaq Composite futures demonstrated reductions of 0.6% and 0.7%, respectively.

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Notably, Tesla's shares have exhibited a remarkable ascent of 95% within the current year.

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