Tesla is pausing production of its Model S and Model X for 18 days in late December. In an internal email obtained by CNBC, CEO Elon Musk acknowledges that the brand’s most expensive models are not selling well in the quarantine-depressed market. We do not, however, expect that any discounts will result.
“We are fortunate to have the high-class problem of demand being quite a bit higher than production this quarter,” Musk wrote to all employees late last week.
The halt in production does not apply to the more affordable Model 3 and Model Y, which are steadily becoming most of the company’s business. The Model 3 carries a base price of $37,990, while the Model Y starts at $12,000 more. Last quarter, the more expensive S and X made up just 11 percent of Tesla’s sales. Demand for the Model S might also be suppressed by the upcoming release of its high-performance Plaid edition. Some customers might be waiting for the faster model and most expensive Tesla at $139,990.
Despite the dip in sales, we don’t expect Tesla to start discounting the S or X. The company uses a different sales model than most of the auto industry – operating its own storefronts rather than working with a network of dealerships, and simply not selling cars in states that bar that practice. The Model S starts at $69,420, while the Model X costs $79,990.
Tesla did cut prices on most of its lineup earlier in 2020 but has not yet offered the temporary incentives more traditional automakers are known for.
