Tesla has dropped the prices of its electric vehicles (EVs) and its Full Self-Driving (FSD) software over the past few weeks, reigniting larger discussions about the automaker’s overall pricing strategy.
In response to one person criticizing the frequency of Tesla’s price changes, Elon Musk has pointed to the dealership model, noting that most automakers change prices on their vehicles more regularly than consumers may realize.
On Friday, Tesla reduced the price of the Model S, X, and Y by $2,000, after the company cut the price of monthly FSD subscriptions in half earlier this month.
On Saturday, Tesla also cut the price of the outright FSD purchase option, to which some consumers and shareholders responded with frustration.
Tesla’s pricing strategy comes down to one key difference from its competitors Following the news, Omar of Whole Mars Blog noted that he finds Tesla’s pricing strategy incoherent, to which Sawyer Merritt noted that this was one of the rare downsides of the direct-to-consumer sales model, despite the extra pricing transparency.
“I think that if you had a monkey throw shit at a keyboard to come up with a pricing strategy for Tesla it would be more coherent than what we’ve seen,” Omar said on Sunday.
Should I buy FSD now because the price was cut?
Elon Musk comments on Tesla’s pricing strategy following cuts
Over the past few weeks, Tesla has lowered the cost of both its Full Self-Driving (FSD) software and its electric vehicles (EVs), sparking new debates regarding the automaker’s overall pricing approach. Elon Musk cited the dealership model in response to a critic who expressed dissatisfaction with Tesla’s price changes, pointing out that most automakers alter their prices more frequently than consumers may be aware.
Tesla slashed the cost of monthly FSD subscriptions in half earlier this month, and on Friday, the company further reduced the price of the Model S, X, and Y by $2,000. Additionally, on Saturday, Tesla reduced the cost of the outright FSD purchase option, to the annoyance of certain investors and customers.
There is a single, significant distinction between Tesla and its rivals in terms of pricing.
Following the news, Sawyer Merritt pointed out that, despite the increased pricing transparency, Omar of Whole Mars Blog found Tesla’s pricing strategy to be inconsistent. This is one of the rare drawbacks of the direct-to-consumer sales model.
“I believe that developing a pricing strategy for Tesla would be more logical if a monkey were tossing shit at a keyboard,” Omar stated on Sunday. “Once we release FSD, the price of the subscription will increase. We’ll actually cut it. The price of the Model Y is increasing. We are really lowering them at this point. “.
While entertaining to watch, customers may find it unclear. Since the price of FSD has dropped, should I buy it now or hold off to save thousands of dollars until the next price drop?
The MSRP of a car is frequently far from its actual price, and Musk responded by pointing out that the dealership model lacks the transparency that a direct-to-consumer model provides.
In fact, the price reductions for the Model S, X, and Y last week came after smaller price reductions a few weeks prior, which also affected the Model 3 and saw some car prices fall by as much as $5,000.
Last year, Musk stated that Tesla would prefer to deliver a large number of cars at marginally lower margins, especially considering its future potential for revenue from software and services. This came after aggressive price cuts that sent shockwaves through the vehicle industry.
At the company’s Q1 2023 earnings call, Musk stated, “We’ve taken a view that pushing for higher volumes and a larger fleet is the right choice here versus a lower volume and higher margin.”. But we do believe that eventually, the autonomy of our cars will allow them to turn a healthy profit. “.
Therefore, we do think that we are merely setting the foundation here, and that once we perfect autonomy, it will be better to ship a big number of cars at a lower margin and then harvest that margin later on. This is a very significant point. “.
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After the price reductions, Elon Musk discusses Tesla’s pricing approach.
