Tesla cuts prices again, this time for the more expensive model

Tesla Inc. (TSLA) surprised the market with another batch of price cuts for its more expensive models.

Key TakeAways

• Tesla has cut the price of its high-end Model S/X by $5,000.
• The company is responding to strong Q1 deliveries, decreased tax credits and falling lithium prices.
• Previous price cuts helped increase deliveries. {alertSuccess}

The automaker slashed the price of its high-end Model S and Model X by over $5,000, to $84,990 and $94,990, respectively. Tesla also cut the prices of its Model 3 and Model Y vehicles by $1,000 and $2,000, respectively.

Tesla's move comes after the company reported record first quarter deliveries of nearly 423,000 vehicles. Previous price-cutting strategies coincided with the economic reopening in China, one of Tesla's key markets, which rose 4%.
Rising demand for BYD electric vehicles, one of Tesla's Chinese competitors, could be a reason for another drop in prices.
The price of lithium, a key ingredient in manufacturing EVs, is also declining, down 57% for the year—potentially giving Tesla some room to cut price.

This is the second time the automaker has cut prices of its vehicles. In January, the company cut prices of some of its vehicles by up to $21,000 in the US and parts of Europe.

Morgan Stanley analyst Adam Jonas, a longtime Tesla bull, said he believes the company could reach 2 million deliveries this year, but suggested additional price cuts in the week.

"We are of the opinion that without aggressive price cuts, Tesla's sales may not grow on a sequential basis," Jonas said.

A production rampup at the company's Fremont and Shanghai factories will also be needed, he added.