Tesla's back-to-back price cuts bring sticker on US Model S below US$70,000

[NEW YORK] US electric vehicle maker Tesla cut the price of its Model S "Long Range" sedan in the United States to US$69,420, its website showed, following a tweet flagging the cut earlier on Wednesday from chief executive Elon Musk.

The cut is Tesla's second this week for the high-end sedan, following a 4 per cent cut to US$71,990 on Tuesday.

Tesla shares closed 3.3 per cent higher at US$461.30 on Wednesday and were little changed in after-hours trade.

The company also on Tuesday reduced by 3 per cent the price of its Model S in China, where it had previously cut the starting price of its Model 3 sedan.

The starting price for Model S is now a thousand times that of a pair of red satin shorts that Tesla started selling in July for "US$69.420" to poke fun at the company's naysayers.

Tesla introduced its Model S in 2012, but in recent years the car has faced competition from the automaker's less expensive, mass-market Model 3 sedan, launched in 2017, which currently starts at US$37,990. The Model S makes up only around 5 per cent of Tesla's unit volume, said a Credit Suisse analyst in a client note on Wednesday.

The analyst said the Model S price reduction was likely in response to price cuts by electric vehicle startup Lucid Motors, which sells its luxury sedan Air model at a starting price of US$69,900. That includes a US$7,500 US government electric vehicle tax credit, for which Tesla vehicles are no longer eligible.

The price cuts also come as competition in the electric vehicle market - long dominated by Tesla - heats up, with several automakers launching new electric vehicles next year.

Germany's Daimler is scheduled to release an electric version of its Mercedes-Benz S-class luxury sedan, the EQS, next year. Analysts expect the EQS to be significantly more expensive than the Model S, however, with the latest version of the petrol-powered S-class retailing at more than 100,000 euros (S$159,475).

REUTERS