Tesla Inc. has increased the US prices of Model S and Model X vehicles after the company’s share price heavily dropped following first-quarter earnings.
As reported on the company’s US website, the automaker has improved the starting prices of all variants of its premium Model S sedans and Model X sports utility vehicles by $2,500, or about 2% to 3%. Currently, the latest starting prices of both models are $87,490 and $97,490, respectively, which is still less than they cost at the end of Q1.
The move reverses some of the substantial price cuts implemented earlier this year, which drained profit margins. Tesla shares fell the lowest in more than three months. After discounting its electric vehicles in January and March, the automaker’s operating margin fell to 11.4% in the first quarter, a roughly two-year low.
However, CEO Elon Musk said on Thursday that the automaker would continue to cut costs to stimulate demand, even though price cuts earlier this year had a considerable toll on profits. “We’ve taken the view that pushing for higher volumes and a larger fleet is the right choice here versus a lower volume and higher margin,” Musk told analysts.
Tesla’s gross margin, excluding sales of regulatory credits, fell to 19% for the quarter, falling short of the 20% target set by Chief Financial Officer Zachary Kirkhorn three months ago.
However, the electric vehicle maker continues outperforming other automakers regarding return on sales. General Motors Co. recorded an operating margin of 6.6% in 2022, while Ford Motor Co. claimed a margin of 4%.
Ford CEO Jim Farley remarked just hours before the price increases were announced that Tesla might start a price war and convert certain electric vehicle models into commodities.
The moves to bolster growth are completely rational and should surprise no one,” Farley said at a charity event in Detroit. “Price wars are breaking out everywhere. Who’s going to blink for growth?”
Tesla’s unique position among EV manufacturers has drawn similarities to Ford’s early days. Its early-twentieth-century innovation, the moving assembly line, drove rival automakers out of business by cutting costs to levels other companies couldn’t match.
Tesla Passes Mercedes & Toyota As Most Valuable Auto Brand
According to new data from French consulting firm Brand Finance, Tesla has eclipsed Mercedes-Benz and Toyota as the world’s most valuable auto brand, with its brand currently valued at $66.2 billion. The EV automaker has risen two places in the rankings and is now worth more than Mercedes and Toyota, which are worth $58.8 billion and $52.5 billion, respectively.
Toyota was the most valuable brand in 2022, while Mercedes-Benz was the second-most valuable vehicle brand. Importantly, the survey states that the EV automaker brand is now worth five times what it was before the pandemic. The brand worth has increased by 44% from last year to this year, making it the first time an EV automaker has led global value rankings.
Other manufacturers haven’t fared well in the transition, despite increased competition for Tesla in the EV industry. Toyota’s brand value fell 18% from last year to current levels, while Mercedes-Benz’s brand value fell 3% during the same period. In the report, Brand Finance Managing Director Bertrand Chovet emphasized Tesla’s accomplishments, pointing to its ability to court new customers as its brand grows more well-known.
“This growth in brand value is a positive sign for Tesla as it indicates that consumers are recognizing and valuing the brand more, which could potentially lead to increased sales and revenue in the future,” Chovet wrote in a press release, as translated from French. “The automotive industry is highly competitive, so for Tesla to achieve this level of growth in brand value is a noteworthy accomplishment and a testament to the value of the Tesla brand.”
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