Tesla Cuts Prices of Model S and Model X Variants in the United States - Report

Tesla Inc has cut prices of its Model S and Model X vehicles in the United States, its website showed, days after chief executive Elon Musk said recent price cuts of other models had stoked demand.

Prices of Tesla's Model S cars were cut by $5,000. The basic version of Model S would now cost $89,990, down from $94,990 before, while its performance variant would cost $109,990, from $114,990 earlier.

Prices of both the performance and basic variants of Model X cars were cut by $10,000, the electric vehicle maker's website showed. The basic version would now cost $99,990 while its performance Plaid version would now cost $109,990.

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Musk has said repeatedly in recent months that Tesla would focus on bringing prices down to drive demand and that it had seen success in sparking orders with global discounts introduced in January.

"The desire for people to own a Tesla is extremely high. The limiting factor is their ability to pay for a Tesla," Musk said last week at Tesla's investor day.

Investor Day Presentation Last Week

Last week, a Tesla Investor Day presentation had teased the arrival of cheaper Tesla cars. Tesla engineers told investors that the cost of future Tesla cars would be nearly halved, making the brand affordable to more people and keeping competition at bay.

According to an AP report, investors were told that the changes in the works would mean that the cost of a new generation Tesla vehicle could start from as low as around $25,000.

At one point during the presentation, Musk pointed out that though demand for Tesla vehicles is large, many buyers can't afford them."The desire for people to own a Tesla is extremely high. The limiting factor is their ability to pay for a Tesla," the chief executive added.

Tesla also unveiled a plan to establish a plant in Mexico, which would the electric car pioneer's only plant outside the US, Germany and China.

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Huge New Investment

Tesla chief financial officer Zach Kirkhorn said the plan is to invest a whopping $175 billion in order to increase car output to 20 million vehicles annually by 2030. Currently, the annual vehicle turnout from Tesla factories is about 2 million vehicles.

The company's plan to set up a factory in Mexico aligned with the expectations that Tesla maybe planning to roll out small electric cars. Downsizing the starting models will be one of the means to penetrate the burgeoning electric vehicle market, which is seeing intense competition in markets across the world.

'Huge Tease'

Big shot Tesla investor Ross Gerber said the presentation clearly showed the future course of action from Tesla. "It's coming. They laid it all out. 50% less cost to build. Would get you a $25-$30k EV!", he tweeted, adding that the presentation was a 'huge tease" on the next-generation models.

Analysts also point out that many automakers launch plants in Mexico where smaller cars are built. However, Musk and other Tesla executives did not give away much information on the new plans and as to when the smaller and cheaper cars would be rolled out.

Tesla shares fell more than 5 percent following the investor day presentation, probably because of the lack of clarity on the future course of action.