A Tesla Model 3 vehicle on an auto carrier in front of a store in Rocklin, California, July 21, 2021.
David Paul Morris | Bloomberg | Getty Images
Tesla shares dropped 5% Friday after the electric car company cut prices on some models in the U.S. and reduced the price for its premium driver assistance software.
The stock closed at $245.01. It’s still up almost 100% this year after gaining 2.7% for the 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 cut the price by $3,000 from $15,000 in the U.S. for customers who purchase it upfront rather than through a monthly subscription. Subscribers pay between $99 and $199 per month, depending on whether they’re upgrading from a standard or other premium version.
Tesla is also cutting prices for inventory vehicles in the U.S., including its entry-level Model 3 sedan, luxury Model S sedan and the Model X SUV. In China, Tesla is reducing the price of the Model S and Model X about 7%.
The FSD discount follows reports that the National Highway Traffic Safety Administration is nearing completion of a years-long investigation into possible safety defects of Tesla’s driver assistance systems. The investigation began after a string of crashes into stationary first responder vehicles by Tesla drivers who were thought to be using driver assistance features.
The price cut for some Model X cars in the U.S. makes the SUV eligible for a $7,500 tax break for qualified buyers. However, the price cuts on Model S and X upset some prior customers in the U.S. and in China, who took to social media to complain that the lower price hurts the resale value of their cars and that they’re paying higher insurance costs because their car was more expensive.
Meanwhile, Tesla’s Model 3 refresh, officially revealed Friday, included controversial changes, such as a “stalkless” turn signal. Drivers of the redesigned Model 3 in China and the EU will need to touch a button on the steering wheel to indicate they’re about to change lanes or turn, and can use park, reverse, neutral and drive controls on the touchscreen in lieu of the left-side stalk. The base Model 3 refresh comes with an approximately 12% higher price tag in China compared to its predecessor.
Also known as the “highland,” the Model 3 refresh includes a longer-range battery. The Tesla China website says the higher-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 passengers in the back to adjust comfort settings and entertainment, along with tweaks to the vehicle’s exterior design, with new colors available.
Due to its pricing, analysts at Bank of America wrote in a note, “We think the impact of the new Model 3 debut on Chinese EV peers should be manageable considering the sedan’s entry price is much high than consumers’ expectation.”
The analysts said the Model 3’s peers in China include XPeng’s P7, BYD’s Han and Seal and Leapmotor’s C01 electric cars.
Considering the increased starting price, initial sales volume for the Model 3 refresh in China may not be as high as previously expected, they said. Still, the analysts remain positive on the outlook for the vehicle’s sales this quarter as consumers have been waiting for the upgrade.
Also this week, Tesla faced reports of new federal probes into the company by the U.S. Securities and Exchange Commission and a Manhattan federal prosecutor about whether it had deliberately misled consumers with its prior EV battery range claims, and improperly used resources to benefit 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.
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Correction: The Model 3 refresh has a haptic turn signal button on the “stalkless” steering wheel and other controls on the touchscreen.