Tesla has recently released new Standard Range trims for its Model S and X vehicles, reducing the sticker price of both vehicles by $10,000 and reducing their range ratings. This move comes ahead of the expected debut of the simplified Model 3 Highland and the highly-coveted Cybertruck.
The Model S and X are Tesla’s first two mass-produced vehicles and have gone through multiple subtle redesigns over the years. The current shift towards lower-ranged, more affordable versions come as Tesla prepares to launch the Cybertruck, which is set to hit production next year.
The Model S now starts at $78,490 with an estimated range of 320 miles, while the Model X is set at $88,490 with an estimated range of 269 miles. With these price cuts, Tesla is hoping to retain market share in the Electric vehicle space, even if it means sacrificing profit margins in the short term.
Tesla CEO Elon Musk explained this strategy during the company’s Q1 earnings report, saying that the goal is to ship a large number of cars at a lower margin, with the expectation that future profits through autonomy would be significant. Musk believes that this would justify the price cuts in the long run.
Despite the price cuts, Tesla’s profit margins have been falling over the last several quarters. In the second quarter, the company reported 9.6 percent operating margins, the lowest in the last five quarters. However, the strategy has seen demand remain strong, while also putting pressure on other automakers to follow suit.
The new Standard Range trims for the Model S and X are a strategic move by Tesla to remain competitive in the Electric vehicle space. The price cuts come at the cost of reduced profit margins, but Tesla is banking on the expectation that future profits through autonomy will justify this short-term sacrifice.