Tesla and Chief Executive Elon Musk want to dominate the electric-vehicle market.
To do this, they are transforming their vehicles into salons on four wheels by equipping them with the latest technological innovations.
At the center of this transformation is the controversial Full Self Driving system, the advanced option of Autopilot, which is the standard driver-assistance system that comes with Tesla vehicles.
While FSD is at the center of regulatory investigations and is widely criticized, the system is popular with Tesla and Musk fans, who say the system has already saved lives and is a big help for Tesla drivers.
"In 2014 a model S owner fell asleep at the wheel and killed cyclist. If there was even basic autopilot in 2014, the cyclist would still be alive. We got to get a move on here as it’s a real safety issue," Musk told die-hard Tesla fans, according to a short video posted on Twitter.
Musk confirmed the statement on March 5.
Tesla Launches Price War
But it's not just about equipment. Tesla (TSLA) and Musk also want to challenge their rivals on the price front. They started by drastically reducing the prices of their most popular and less expensive models, the Model 3 sedan and the Model Y midsize SUV.
On Jan. 12 the EV leader slashed prices on the different versions of the Model 3 and Model Y, mainly to enable potential buyers to benefit from the federal tax credit of $7,500 offered by the Inflation Reduction Act since Jan. 1 of this year.
The price cut, which came after months of rising prices due to supply-chain disruptions and chip shortages, was unprecedented at Tesla. Some variants have seen their prices reduced by 20%.
The move had led to strong demand for both models, Musk said during Tesla's Jan. 25 earnings presentation. Indeed, the price war made Tesla vehicles very competitive against, for example, offerings from Ford (F) -- the Mustang Mach-E -- and General Motors (GM) -- the Cadillac Lyriq and Chevrolet Bolt.
Two months ago, Tesla had also cut prices on the luxury models Model S and Model X, but less attention was paid to these high-end vehicles.
Now, Tesla wants to send a clear message to Mercedes-Benz (DMLRY) , BMW (BMWYY) , Porsche (POAHY) and Lucid (LCID), which are its main rivals in the luxury-EV segment.
The Austin carmaker has again cut prices of these two models, according to dedicated websites.
The price of the Model S sedan is down 5.3%, to $89,990, from where it had been since Jan. 12. Before that date, the base Model S had cost $104,990. In all, the base price of this version has declined $15,000, or 14.3%, this year.
The Model S Plaid base price is down 4.3% as of March 5, to $99,990. But since Jan. 12, this version's price is down 19% because it was priced at $135,990 before that date. The price of the Model S Plaid has dropped $36,000 this year.
As for the Model X SUV, the base price has decreased by 9.1% to $109,990 as of March 5. But the drop is 17% since Jan. 12. Before that date, this full-size SUV -- with its distinctive butterfly doors -- was priced at $120,990.
The Model X Plaid Version as of March 5 is base-priced at $109,990. That's down 8.3% from Jan. 12. Prior to Jan. 12, the version cost $138,990. So the price of this variant has dropped by $29,000, or 21%, this year.
'Big Effect on Demand'
"We found that even small changes on the price have a big effect on demand, very big, so that was the very good thing to learn," Musk said on March 1 during Tesla's Investor Day. The CEO added that demand will "go crazy" as the company's cars become more affordable.
The new Model S and Model X price cuts pressure Tesla's rivals and almost force them to respond in kind. But the open question is whether they can afford to sacrifice their margins to defend their market shares while the development costs of electric vehicles remain high because of the batteries.
"Tesla cutting Model S and X prices another smart strategic move by Musk & Co," commented Wedbush analyst Dan Ives. "Lower price points have resonated well and spurred considerable demand with Model Y/3 and this continues down that path. Margins remain so above industry, Tesla in a position of strength on price cuts."
