As of now, the price of the Tesla Model S and Model X equipped with a 100 kWh battery — the largest in the Tesla lineup — is $3,000 less than it was last month. The new base price of the Model S 100D is $94,000 and that of the Model X 100D is $96,000. This is the second price cut for the Model X. Earlier this year, Tesla reduced the starting price for its SUV by $3,000 as well.
The price reductions result from production efficiency gains, according to the company. The lower price of Model S and Model X vehicles equipped with the 100 kWh battery reflects “cost efficiency improvements of approximately 3% in 100 kWh pack production,” it said in a press statement earlier this week.
The 100 kWh battery uses an all new architecture. The cells are the familiar 18650 units Tesla has been using since the beginning, but they are arranged differently in the battery pack so that more of them fit in the same space as before. That required an entirely new cooling system and new manufacturing techniques.
One factor often overlooked is that changes in the norm almost always result in lower performance initially, until the bugs and kinks in the new system get worked out. The gains come later. Tesla admits it had problems building enough of the 100 kWh batteries to meet initial demand, resulting in a “severe production shortfall.” Those issues have now been resolved, helping the company deliver a record number of cars in June.
Tesla is juggling its product mix as it tries to integrate the new Model 3 into its catalog of available models. It doesn’t want the new car to steal sales from its two larger cars. Nor does it want the existing models to take customers away from its newest offering. The Model 3, for the moment, is available only in a single motor, rear-wheel-drive (RWD) configuration. Recently, Tesla discontinued the single-motor, RWD version of its Model S sedan. Both the Model S and Model X are now available only in a dual-motor configuration.
Before the change, there was the possibility that that a fully optioned Model 3 could get uncomfortably close to that of an entry level Model S. Now, that price gap is larger, which makes it easier for the customer to select the car that best fits his or her driving needs.
All Teslas with the 100 kWh battery are also available with the so-called Ludicrous option, which increases acceleration significantly. Tesla has announced a $5,000 price cut on that option. The Model S P100D with Ludicrous now costs $135,000. The Model X P100D with Ludicrous starts at $140,000. The least expensive Model S is priced at $69,500 while the Model X base price is listed as $79,500.
Amidst all of this juggling of prices and equipment, some analysts have suggested that demand for Tesla’s largest cars is faltering. In the second quarter of 2017, Model S sales totaled about 12,000 cars, compared to 16,000 in the second quarter the previous year. Some of that may be attributable to interest in the new Model 3, which went into production last month to great fanfare. However, Tesla stated it was basically due to a short-term manufacturing bottleneck.
Now that the supply of 100 kWh batteries is no longer constrained, it will be interesting to see the sales numbers the company reports for the third quarter. That’s when we will know if the trend for the large cars is up or down.