Tesla’s “Model S” Price Bump

Model S sedan, Elon Musk, free cash flow, price hike

The rumor has it that the automaker giant has been planning to increase the price of its most popular Mode S sedan.

According to the rumor mill, the Palo Alto, Calif. firm’s prestigious Model S sedan is expected to go under the price hike in the coming month. As per the claims made by two unnamed people –through Tesla Motors Club –the luxury electric car maker’s representatives have hinted about a probable bump in the price of the Model S, which is more likely to start from April. Therefore, any buyer who has been intending to buy the prestigious car should buy it any time before the next month to save him from the possible price increase.

The source privy to the matter –who earlier gave the disclosure of the price bump –further uncovered that the $28 billion organization is not increasing the price against the introduction of new features. Therefore, the more expensive Model S sedan wouldn’t be laden with new features however the only reason the company is marking a price increase is that it has not raised the price of the Model S for years.

Tesla Motors Club is not the official news forum of the automaker giant therefore, the news on the forum is not absolute. Nevertheless the probable price increase has high level of certainty since the initiative is likely to raise the average transaction price (ATP) of electric sedan.

As of now, the base model has a price of $75,000 whereas the Model S 90D version’s price tag can be escalated up to $100,000. The price raise is strategically competitive move for the electric car maker who already has a high demand for its cars but a slower production.

Through this initiative, the Californian based company will be able to toughen up its top-line performance as currently the company has been reporting limited number of delivery volumes. Last year, the luxurious electric car maker managed to sell a total of 50,580 units out of which only 208 units pertain to the newly launched Model X while the rest of the total was accumulated by Model S. Moreover, in the last quarter, Tesla Motors recorded an increase of colossal 48% in the sales of Model S. The automaker, therefore, in order to keep the vehicle popular among the consumers and prospective buyers, has been upgrading the vehicle with additional features.

Analyst at UBS, on the basis of slow ATP for its vehicles, brought down the target price of Tesla Motors, last October. The analyst expressed that many consumers will prefer ordering a Model S over Model X because of the fact that the latter has a slower production and it took almost 8-12 months for the delivery after the order has been placed whereas, the former took a period of three months only for getting delivered. The company’s charismatic CEO, Elon Musk had noticed a modest increase in Model S sales as well particularly after the launch of Model X late last year in September 2015. Moreover, the consequences of low-priced Model S’s slow ATP are such that the company has expected a loss of $0.65 per share.

Through the price hike, the company is expected to improve sales and free cash flow position –the firm has been expecting to turn it positive in the current quarter. As at the market which closed on Friday, Tesla Motors stood at a price of $207.5.


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