Tesla Model 3 Sees Price Cut Ahead Of $100K 'Full Self-Driving' EV Launch

Electric car maker Tesla has announced a price cut for its best selling Model 3 for making it more affordable. Simultaneously, Tesla will also discontinue the standard versions of the Tesla Model S and Model X.

This price cut will be a prelude to Tesla’s proclaimed price overhaul for the upcoming full self-driving (FSD) EVs where prices will go northward in the range of $100,000 to $200,000.

According to the Tesla update on Monday, the price of the Model 3 will be slashed by $1,000 and the new MSRP will be $38,990.

The price cut in Model 3 will be also complemented with a price hike of $1000 for all vehicles with a self-driving Tesla auto pilot mechanism with effect from Aug. 16.

The plan to disband standard versions of the Model S and Model X will jack up the minimum price of those cars.

For Model S, the entry level version will cost $79,990 from $75,000 and Model X price will go up to $84,990 from $81,000.

“To make purchasing our vehicles even simpler, we are standardizing our global vehicle lineup and streamlining the number of trim packages offered for Model S, Model X and Model 3,” a Tesla spokesperson told CNBC.

Expectations on Tesla’s Q2 earnings

Tesla’s pricing changes are set to coincide with the release of its second-quarter earnings (Q2) next week. In Q1, Tesla faced a wider profit and revenue loss after demand tanked from the loss of tax credit for buyers.

The Q2 results are expected to be encouraging. In the quarter that ended on June 30, Tesla produced a record of 87,048 vehicles and deliveries jumped modestly to 95,200 vehicles vis a vis previous quarter. In the pre-trade of Wednesday Tesla stock was down 0.4 percent.

In April, Musk alerted that the full self-driving functionality would “increase substantially over time.”

Musk’s statement is more forward-looking as Tesla’s cars are not yet fully autonomous although he claims full features will get ready in the next two years.

The Tesla CEO is pinning high hopes on Tesla’s self-driving cars and tried to excite investors at a recent meeting telling that autonomous driving will zoom the company’s market cap to $500 billion from the current $44.6 billion.

Making Tesla cars appreciating assets

Meanwhile, Musk’s new pitch of Tesla cars becoming “appreciating assets” has attracted market attention. This premise hinges on Tesla prices zooming astronomically to $100,000 to $200,000 when the Full Self-Driving package is in place.

A recent report had said Tesla will reduce the open retail sale of cars after full FSD and deploy the fleet for its robotic taxis making each car earning machines in its lifetime.

The CEO’s rationale of the vehicle becoming pricey assets for consumers also stems from the proposed plan to launch Tesla’s self-driving taxi chain like Uber’s network.

Musk’s plans on leasing cars to the taxi chain will involve taking a fee to induct a car onto the Tesla network to allow the owner to earn good money in his car.

According to analysts, Musk is right in hiking prices if Tesla’s vehicles become appreciating assets. But Tesla vehicles are currently depreciating assets like all cars. If Tesla delivers on the self-driving package and then hiking prices accordingly, buying an appreciating asset will become true.