Demand for high priced cars is currently weak. Tesla has lowered the price on Model S and X on March 6 2023.
Model S now sells for:
| Model S | Model X | |
| Dual Motor All Wheel Drive | $89,990 | $99,990 |
| Tri Motor All Wheel Drive Plaid | $109,990 | $109,990 |
A sign of low demand is the estimated delivery time. It currently shows an order placed on both S or X today can likely be delivered by the same month, March 2023.
There are thousands of reasons why someone may not be buying an expensive car. It’s impossible to know for sure. The economy likely would have something to do with it. It’s very possible the economy affects the high end automobile market. The high tech industry for example has laid off thousands of workers from some of the well known companies like Google, Microsoft, Netflix, Twitter, and Meta. A person who is laid off is not likely going to be purchasing a big ticket item like a $100k car. Their priority is to sharpen their skills and look for another opportunity. It’s not easy since most companies are facing an uncertain environment and are enforcing hiring freezes. Even those who are not laid off may also be putting off a big ticket item especially if they believe another round of laid off may be right around the corner. To feel confident about making a big ticket item, the consumer with the means to do it need assurance the economy is improving and in strong footing.
The Model S and X price points are too high to qualify for EV credit. In comparison to the Model 3 and Y, there’s a big gap and some consumers may choose go with either the 3 or Y instead.
Model S/X Q4-2022 deliveries were 17,147 grew 46 YoY from Q4-2021 ‘s 11,766 but declined form Q3-2022’s 18,672. These numbers when compared to the Model 3/Y is small. Model 3/Y Q4-2022 deliveries were 388,131, grew 31% from Q4-2021 296,884 and grew from Q3-2022’s deliveries of 325,158. Based on Q4 2022, Model S/X represents 17,147/(17,147+388,131) = 17,147/405,278 = .0423 = 4% of total deliveries. Model S/X’s impact to overall revenue is not as significant as Model 3/Y. To evaluate the impact to revenue, let’s assume the worse case that all Model S/X sold are the lower cost Dual Motor All Wheel Drive and it’s 50-50 split between S/X. The average price would be (89,990 + 99,990) /2 = 94,990.
Revenue for Model S/X would be 17,147 * $94,990 = $1,628,793,530.
To estimate Model 3/Y, let’s assume it’s only the Model 3 Rear-Wheel Drive at $42,990 and the Model Y Long Range $54,990 and the split is 50-50 between Model 3/Y. (42,990 + 54,990)/2 = 48,990.
Model 3/Y revenue would be 388,131 * $48,990 = $19,014,537,690.
From this very rough estimate which assumes all cars sold used U.S. pricing and model selection, impact from Model S/X pricing change to total revenue is not large. The pricing change is changing 1628793530/(1628793530+19014537690) = .0789 = 8% of revenue contributed from Model S/X. This is only an estimate but for the purpose of demonstrating the impact of Model S/X to revenue, it’s good enough for a ballpark figure. It ignored pricing deviations from US in Germany and China and the availability of a lower cost rear wheel drive Model Y in China and the different mixes of cars sold. This information is not released in Tesla’s earnings report.
Tesla is trying make the Model X and Y more affordable to balance out the production rate w/ the delivery rate and avoid having to halt production. We will know by Q1 2023 earnings what the deliveries are.