Tesla has raised the prices of its Model S and X vehicles in the United States by $2,500 for each variant, equivalent to a 2% to 3% hike in the cost of the sedan and SUV. The new prices of the Model S and X are now $87,490 and $97,490, respectively, following a period of reduced profitability earlier this year that impacted the company’s shares.
While Tesla has raised the prices of its high-end models, they are still more affordable than they were at the end of Q1 when price cuts across the company’s lineup hurt profit margins; furthermore, this increase comes after Tesla’s second price cut this month, which affected its high-volume Model Y SUV and Model 3 sedan.
Following Elon Musk’s announcement that Tesla will continue to reduce prices to encourage sales, the company’s shares plummeted 9.7% on Thursday, marking the biggest drop since January 3, yet the stock regained some ground and increased by 1.8% before the start of regular trading on Friday.
Although Tesla has raised prices for its high-end vehicles, adjusting prices for the Model 3 and Model Y are more critical to the company’s bottom line. The sale of only 10,695 Model S and X vehicles in Q1 accounted for about 2.5% of total deliveries, and despite CEO Elon Musk’s comment that the two vehicles are of minor importance to Tesla’s future, the company has resumed exporting them from its California car plant.
In the first quarter, Tesla’s automotive gross margin, excluding regulatory credits, decreased to 19%, below the projected 20% threshold for the year, and its operating margin dropped to 11.4%, a two-year low. Despite this, the company’s return on sales is still higher than that of other automakers, with General Motors reporting an operating margin of 6.6% and Ford’s 4% in 2022.