A Tesla Model 3 vehicle on a car carrier outside a store in Rocklin, California, July 21, 2021.
David Paul Morris | Bloomberg | Getty Images
Tesla shares fell 5% on Friday after the electric car maker cut prices on some models in the U.S. and lowered the price of its premium driver assistance software.
The stock closed at $245.01. The stock is still up nearly 100% this year after gaining 2.7% this week.
While Tesla CEO Elon Musk has said in the past that the price of Tesla’s premium driver assistance option, marketed as “full self-driving” software, would only ever go up, the company lowered the price in the US for Customers who purchase around $3,000 out of $15,000 purchase it in advance rather than through a monthly subscription. Subscribers pay between $99 and $199 per month, depending on whether they upgrade from a standard or other premium version.
Tesla is also cutting prices on existing vehicles in the U.S., including the entry-level Model 3 sedan, the Model S luxury sedan and the Model X SUV. In China, Tesla is cutting the price of the Model S and Model X by about 7%.
The FSD discount follows reports that the National Highway Traffic Safety Administration is nearing completion of a year-long investigation into possible safety deficiencies in Tesla’s driver assistance systems. The investigation began after a series of collisions involving stationary first responder vehicles by Tesla drivers who were believed to be using driver assistance features.
Due to the price reduction for some models, however, the price reductions on the Model S upset and the car was more expensive.
Meanwhile, Tesla’s Model 3 update, officially unveiled on Friday, included controversial changes such as a “stemless” turn signal. Drivers of the redesigned Model 3 in China and the EU You have to touch a button on the steering wheel to indicate that you want to change lanes or turn, and you can use the park, reverse, neutral and drive controls on the touchscreen instead of the left stalk. The base refresh of the Model 3 comes with a roughly 12% higher price tag in China compared to its predecessor.
The Model 3 Refresh, also known as the “Highland,” features a longer-range battery. Tesla China’s website says that the high-end version of the Model 3 Refresh can travel up to 713 km (443 miles) on a single charge, and the base model can travel 606 km (377 miles). The new Model 3 variant also features several design changes, including a touchscreen that allows rear passengers to adjust comfort settings and entertainment, as well as tweaks to the vehicle’s exterior design, with new colors available.
Because of the pricing, analysts at Bank of America wrote in a note: “We believe the impact of the new Model 3 debut on Chinese EV rivals should be manageable, given that the sedan’s starting price is well above expectations the consumer lies.”
The analysts said the Model 3’s competitors in China include XPeng’s P7, BYD’s Han and Seal and Leapmotor’s C01 electric cars.
Given the increased starting price, the initial sales volume for the Model 3 refresh in China may not be as high as previously expected, they said. Still, analysts remain positive about the outlook for vehicle sales this quarter as consumers have been waiting for the upgrade.
Also this week, Tesla faced reports of a new federal investigation into the company by the U.S. Securities and Exchange Commission and a federal prosecutor in Manhattan into whether the company intentionally misled consumers with previous claims about the range of electric vehicle batteries misled and misused resources to help Musk personally.
Regarding the use of company resources, Musk on Friday denied reports that Tesla had plans to build him a “glass house” near Austin, Texas.
REGARD: The Chinese electric vehicle market is dominated by BYD and Tesla