Elon Musk comments on Tesla's pricing strategy after the cuts

Tesla has cut prices for its electric vehicles (EVs) and Full Self-Driving (FSD) program over the past few weeks, reigniting larger discussions about the automaker's overall pricing strategy. In response to someone criticizing Tesla's frequent price changes, Elon Musk pointed to the sales model, noting that most automakers change the prices of their cars more regularly than consumers might realize.

On Friday, Tesla reduced the price of the Model S, On Saturday, Tesla also lowered the price of its FSD direct purchase option, to which some consumers and shareholders responded with frustration.

Following the news, Omar of Whole Mars noted that he finds Tesla's pricing strategy incoherent, with Sawyer Merritt noting that this was one of the rare downsides of the direct-to-consumer sales model, despite the additional pricing transparency.

“I think if you had a monkey throwing a monkey at the keyboard to come up with a pricing strategy for Tesla, it would be more coherent than what we've seen,” Omar said Sunday. “The subscription price will go up once the FSD is released. In fact we will cut it. We are raising Model Y prices. In fact now we are lowering it.”

“It's fun to follow, but it can be confusing for consumers. Should I buy FSD now because the price has been reduced? Or should I wait for the next FSD price reduction and save thousands of dollars?

In response, Musk noted that the dealership model does not offer the same level of transparency as the direct-to-consumer model, as the MSRP on a car is often far from its actual price.

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Granted, last week's price cuts for the Model S,

Last year, after significant price cuts that sent shockwaves through the industry, Musk indicated that Tesla would opt for a large number of vehicles delivered at slightly lower margins, especially given its future potential for revenue from software and services.

“We've taken the view that pushing for higher volumes and a larger fleet is the right call here versus lower volume and higher margin,” Musk said during the company's Q1 2023 earnings call. “However, we expect that, over time, our cars will be able to generate significant profits through autonomous driving.”

“So we think we're kind of laying the foundation here, and then it's better to ship a large number of cars with a lower margin, and then harvest that margin in the future as we achieve full autonomy. That's a very important point.”

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