Unraveling the Mysteries Behind Teslas Price Cuts: An Inside Look

Unraveling the Mysteries Behind Tesla's Price Cuts: An Inside Look

Tesla has recently reduced the base price of the Model S to 69,420, a move that has caught the attention of many automotive enthusiasts and observers. This strategic price cut is a response to the similar reduction of the base model Lucid Air, which has also seen a price drop. In this article, we will delve into the reasons behind this price adjustment and explore the implications for Tesla's competitive landscape in the electric vehicle (EV) market.

Why Did Elon Musk Make the Decision?

A Defensive Measure

The price cut on the Model S is not just a reaction to the Lucid Air, but also serves as a defensive measure. Tesla wants to ensure it maintains its market position in the face of competition from new entrants like Lucid. The Lucid Air is not expected to be fully available until the following year, and Tesla aims to prevent potential sales losses during this interim period. Furthermore, Tesla has a history of lowering prices as production costs decrease, a practice that effectively keeps the company's products competitive.

Inside Joke and Marketing Strategy

The new price undercuts Lucid Air just slightly, but it also serves as a clever inside joke. The number 69420 is a nod to Elon Musk's infamous tweet about taking Tesla private at $420 per share. He paid a $20 million fine for this tweet, adding a layer of humor and intrigue to the price point. This subtle reference not only entertains the tech-savvy community but also reinforces Tesla's brand identity and the company's penchant for creative solutions.

Increasing Demand and Selling More Cars

Tesla is aware that its Model S is not selling as many units as it could. Current sales are around 17,000 per quarter, while Tesla can produce around 25,000 units per quarter. The company has ambitious goals, aiming to sell 500,000 vehicles this year and needing a strong fourth quarter to achieve this. By lowering the price, Tesla hopes to boost demand and maintain market share.

Additionally, Tesla has lowered the prices of the Model 3 and Y to further drive sales and support its overall strategy. This move is a part of a broader plan to increase the number of vehicles sold and to create a more accessible lineup for potential customers.

The Implications for the Market

The Osborne Effect

The Osborne Effect, coined after the failure of Osborne Computer Corporation, is a phenomenon where customers delay purchasing decisions when new, advanced products are announced too soon. Tesla, with the announcement of the new "Plaid" model, is certainly aware of the risk of this effect. The Plaid model will not be delivered until late 2021, indicating that Tesla is not using the impending release of the new model to push customers away. Instead, the company is positioning the Model S, now priced at 69,420, as a clear line in the sand for those who don't need the absolute best and want to avoid outdated technology.

By setting the price to 69,420, Tesla is sending a signal to customers that the time is now to buy, before the next generation of technology becomes available. This strategy aims to encourage immediate purchases and prevent the Osborne Effect from degrading sales.

Previous Analysis: Why Did Elon Set the Price at 69,420?

The choice of price, 69,420, is indeed a humorous one, but there is a deeper meaning behind it. For those who need a concrete reason, the number 69420 is a reference to Elon Musk's tweet that sparked a bidding war for Tesla. The original tweet mentioned taking Tesla private at $420 per share, and Musk paid a $20 million fine for it. Thus, the price of $69,420 is a playful nod to both the tweet that started it all and to the fine that followed, adding a layer of whimsy and trivia to the pricing strategy.

In conclusion, Tesla's decision to cut the base price of the Model S is a multifaceted move that addresses market competition, customer behavior, and brand identity. It is a strategic decision that reflects the company's innovative spirit and its commitment to making electric vehicles more accessible and competitive.