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Tesla Reduces Prices on Models S and X Amid Stock Slump

Tesla has reduced the prices of its two most expensive models, raising concerns about fading interest in its cars and whether the company can generate enough cash to pay all the bills.

On Monday, Tesla cut $3,000 from the price of the Model S sedan and $2,000 from the Model X SUV.

The company said in a statement that it periodically adjusts prices and available options like other car companies. The decreases offset price increases from a month ago when Tesla offered longer battery range and added a new drive system and suspension. The statement didn’t say if slowing sales influenced the decision.

The moves come as Tesla’s stock is under pressure from investors who are becoming skeptical of CEO Elon Musk’s ability to turn a profit and keep the business growing, all while balancing demands of developing a self-driving ride system and building new products such as a small SUV, a pickup truck, a new roadster and an electric semi.

“The business fundamentals of Tesla always have been shaky, but the stock price has been buoyed by the story that this is a company that was going to do huge things,” said Navigant Research analyst Sam Abuelsamid. “What we’ve seen in the last month or so is people are starting to recognize maybe that wasn’t really true.”

The Palo Alto, California, company, which had been growing sales until this year, has run into trouble while trying to make the transition from a niche producer of luxury electric vehicles to a mass-market automaker. In order to control costs to bring down the price of its less-expensive Model 3, it’s been forced to go through two rounds of layoffs and close some of its stores.

Musk told employees that expenses are being reviewed since the company went on a “Spartan diet” after losing $702.1 million in the first quarter. All of this came after Tesla had difficulties producing the Model 3.

And Musk’s own behavior has been questionable at times. He’s run afoul of the Securities and Exchange Commission for posting important company information on Twitter. Last year, he was seen appearing to smoke marijuana during an interview. He berated stock market analysts for asking questions about Tesla’s finances and was sued after calling a diver who helped rescue a Thai youth soccer team from a flooded cave a pedophile.

Tesla shares closed Tuesday down slightly at $205.08. They have fallen more than 38% so far this year, cutting the company’s market value more than $20 billion to $36.5 billion.

With the price cuts, the Model S now starts at $71,250 while the X starts at $71,950. Both prices don’t include federal and state tax credits.

Tesla said in a statement that the reductions are about 2% to 3% on the S and X. The company last week raised the price of its top-selling Model 3 by $400, pushing the base price to $35,400.

“By any reasonable standard, these small changes are not newsworthy,” the company said in a statement.

Last quarter was among the worst for Tesla in the past two years. Sales tumbled 31% in the period. Musk predicted another loss in the second quarter but said Tesla would be profitable again by the third quarter.

In January, the automaker cut its prices by $2,000 per vehicle, acknowledging that the pending expiration of a $7,500 federal tax credit for its electric cars will hurt sales. The credit is gradually being phased out for Tesla by the end of the year.

Copyright AP - Associated Press
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