Tesla Armed to Fight a Price War

Tesla Armed to Fight a Price War

Tesla CEO Elon Musk, the quirky joker has stirred up the pot again. Musk announced on Twitter that Tesla is reducing the price of its flagship sedan – the Model S, but it's no joke:

"The gauntlet has been thrown down!

The prophecy will be fulfilled.

Model S price changes to $69,420 tonight!"

It could be that “throwing down the gauntlet” has come in response to Lucid Motors slashing the price of its newly unveiled luxury electric sedan, the Lucid Air. 

At an unveiling event in September, Lucid said their base model would start at $80,000 mark but now the EV company says it is settling on a base model price of $77,400, or $69,900 after applying the US federal tax credit of $7,500.

That version of the Lucid Air comes with 480 horsepower and an impressive range of 406 miles on a single charge. It is a tad bit more than Model S Long Range Plus, which recently earned the US Environmental Protection Agency rating of 402 miles.

Until recently, the EPA-rated range of the Model S Long Range Plus was 391 miles, but this had been a source of contention between Tesla and the EPA. Last month, Musk claimed the rating was a result of a mistake made by the EPA, which caused the car to lose 2 percent of its range when tested. However, the government agency disputed this, and said the car had been tested properly. At the time, feisty Musk said the car would be re-tested when the EPA reopened.

This week, the EPA finally approved the new range estimate after receiving data from Tesla gathered during an in-house test. The EPA announced:

“Tesla has updated the 2020 Model S Long Range Plus vehicle making several changes to the vehicle from the one EPA previously tested. EPA approved the new label value based on a review of the testing protocols and data submitted by Tesla and found it was complete and accurate.”

It appears that Lucid Air is looking to become a big competitor of Tesla, even though the company claimed Tesla is not the primary target. Lucid’s top executives have said in the past that it aligns itself with the customers in the Mercedes-Benz S-Class market. Mercedes also released a new version of its flagship S-Class that includes improved technology and an advanced voice assistant version. But the S-Class is not in the EV space and still runs on dinosaur fuel.

Musk's recent tweet signals the second cut this week after Tesla announced the Model S price will be cut $3,000 overnight. That $3,000 price reduction brought the Model S Long Range Plus down to a starting price of $71,990 in the U.S. and a $91,900 starting price for the Model S Performance version. However, the Model S Plaid price is not budging and still remains at the starting price of $139,990.

So, the Model S’s new price tag of $69,420 means the second cut would take another $2,570 off the Model S price tag this week for a total reduction of $5,570. This is good news for potential Tesla owners! The new Model S price comes as Tesla reported 15,200 combined global deliveries for the Model S and Model X SUV in the third quarter, which was down nearly half from the 27,660 recorded in 2018. Overall Tesla deliveries set a quarterly record of 139,300 on the strength of the lower-priced Model 3 and Model Y.

Prices have dropped in China recently as well. According to data from the China Passenger Car Association, Tesla deliveries in China totalled 11,329 units in September, lower than its August sales numbers, but a number that put Tesla in the top three new energy vehicle makers, based on sales there.