Automaker Tesla has raised the prices of its Model S and X vehicles in the United States after strong sales earlier this year hit the automaker’s shares and profitability. Tesla has raised each variant of its high-end models by $2,500, raising the cost of the sedan and SUV by 2% to 3%, according to the company’s website. The Model S and X now start at $87,490 and $97,490, respectively.
The hikes still leave vehicles cheaper than they were at the end of the first quarter when price cuts across Tesla’s lineup slashed profit margins. The adjustments come two days after Tesla cut the prices of its Model Y SUV and Model 3 sedan for the second time this month. Shares of Tesla fell 9.7% on Thursday, the biggest drop since Jan. 3, after Chief Executive Officer Elon Musk suggested the company would continue to cut prices to fuel demand.
Shares rose 1.8% before regular trading began on Friday. “We felt that driving higher volumes and a larger fleet is the right call here versus lower volumes and higher margins,” Musk told analysts Wednesday evening. Changing the price of your high-end vehicles is far less significant to your bottom line than adjusting what you charge for cheaper models. The company sold just 10,695 of the S and X models in the first quarter of the year or about 2.5 percent of total deliveries.
While Musk said the two vehicles are “of minor importance” to Tesla’s future, the company recently began exporting them again from its California auto plant. Tesla’s automotive gross margin excluding regulatory credit sales fell to 19% in the quarter, below the 20% threshold that Chief Financial Officer Zachary Kirkhorn said three months ago the company expected to stay below. above this year.
Its operating margin fell to 11.4%, a low in about two years. The company remains ahead of other automakers in terms of sales performance: In 2022, General Motors reported an operating margin of 6.6%, while Ford Motor Co.’s was 4%.
Hours before the price hikes were published, Ford CEO Jim Farley said Tesla could start a price war and commoditize some EVs. Tesla’s moves to spur growth are “completely rational and shouldn’t surprise anyone,” Farley said at a charity event in Detroit. “Price wars are breaking out everywhere. Who will blink to grow?
Tesla’s unique position among electric vehicle makers has drawn comparisons to the early days of Ford. His early 1900s innovation, the moving assembly line, put other automakers out of business by cutting costs to levels other companies could not match. Musk said Wednesday that Tesla isn’t trying to put its competitors out of business but to make its cars more affordable amid rising interest rates and stubborn inflation.