Tesla’s stock took a hit on Friday, dropping 5%, after the company announced price cuts on certain vehicle models in the U.S. and reduced the cost of its premium driver assistance software. Despite this, the stock is still up nearly 100% for the year.
In a surprising move, Tesla decided to lower the price of its Full Self-Driving software by $3,000, contradicting CEO Elon Musk’s previous statements that the price would only increase. The company also slashed prices for inventory vehicles, including the Model 3 sedan, Model S sedan, and Model X SUV, in the U.S. In China, the prices of the Model S and Model X were reduced by about 7%.
This price adjustment comes as the National Highway Traffic Safety Administration wraps up its investigation into possible safety defects related to Tesla’s driver assistance systems. The investigation was prompted by a series of accidents involving Tesla vehicles colliding with stationary emergency vehicles while using the driver assistance features.
While the price cut on the Model X in the U.S. makes it eligible for a $7,500 tax break for qualified buyers, some customers have expressed dissatisfaction with the reduced prices. They argue that the lower price negatively impacts the resale value of their vehicles and increases their insurance costs.
In addition to the price cuts, Tesla unveiled the Model 3 refresh, which includes controversial changes such as a “stalkless” turn signal. Drivers in China and the EU will now need to tap a button on the touchscreen to indicate lane changes or turns. The refreshed Model 3 comes with a higher price tag in China compared to its predecessor but boasts a longer-range battery and several design updates.
Bank of America analysts predict that the impact of the new Model 3 debut on Chinese electric vehicle competitors should be manageable, considering the higher entry price. While initial sales volume may not meet expectations, the analysts remain positive about the vehicle’s sales outlook this quarter, as consumers have been eagerly awaiting the upgrade.
In addition to these developments, Tesla faces new federal investigations by the U.S. Securities and Exchange Commission and a Manhattan federal prosecutor. These investigations focus on whether the company misled consumers with its previous claims about EV battery ranges and if it improperly allocated resources to benefit Elon Musk personally. Musk, however, denied reports that Tesla was planning to build him a “glass house” near Austin, Texas.
Overall, Tesla’s recent moves suggest a desire to make its vehicles more accessible to customers while navigating potential regulatory challenges and maintaining market dominance.
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