Investor's Corner

Tesla (TSLA) shows volatility amid updates to Model 3, S, X prices and variants

Tesla shares (NASDAQ:TSLA) are showing volatility on Tuesday as the electric car maker introduced its most recent adjustments on the prices and variants of its Model 3, S, and X lineup. These changes come amidst an update from Moody’s Investors Service, which recently upgraded Tesla Auto Shares Trust’s 2019-A Notes. 

Tesla’s updates to its electric car lineup on Tuesday draws a clear line distinguishing the company’s entry-level Model 3 sedan to the flagship Model S sedan and Model X SUV. As per Tesla’s official website, the Model 3 Standard Plus now costs $38,990, the Long Range Dual Motor AWD costs $47,990, and the Dual Motor Performance costs $54,990. All of these prices include basic Autopilot as standard. 

Just as stated by Elon Musk in a previous tweet, the Model 3’s default color has now been changed to White. So far, the Tesla website lists Pearl White Multi-Coat as the vehicle’s standard color, instead of the Simple White mentioned by Elon Musk on his earlier tweet. The Model 3 Standard Range, which does not have basic Autopilot bundled in, remains available as an off-menu item for North America. 

Tesla’s updated lineup and prices for the Model X, Model S, and Model 3 as of July 16, 2019. (Credit: Tesla)

The Standard Range versions of the Model S and Model X have both been discontinued, with the company keeping only the Long Range and Performance versions of the two vehicles available. What is notable is that the Model S and Model X Performance now come with Ludicrous Mode, formerly a $20,000 optional upgrade, as standard. 

Tesla’s recent changes to its electric car lineup appear to have polarized the company’s shareholders, potentially resulting in the volatility being displayed by TSLA shares on Tuesday. Yet, it is pertinent to note that these recent price adjustments are also likely motivated by the reduction of the US federal tax credit, which dropped to just $1,875 per vehicle starting this month. 

With these recent price adjustments, Tesla has made the Model 3 an incredibly compelling vehicle for prospective car buyers. At less than $55,000 before incentives, after all, customers can get a car that accelerates at near-supercar level with the Model 3 Performance. There are hardly any other vehicles in the market that could compare to the bang-for-your-buck value of a Model 3 Standard Range Plus as well, which offers basic Autopilot at a price point below $39,000. 

With their higher entry price, Model S and Model X orders could see a decline due to these adjustments, especially considering that the Standard Range variants of the flagship sedan and SUV have reportedly been quite popular among customers. Nevertheless, the free Ludicrous Mode upgrade could also result in more orders for the top-tier Model S and Model X Performance, both of which have generous gross margins.

Amidst the news of Tesla’s updated electric car lineup, the company’s Auto Lease Trust 2018-A Notes were recently upgraded by Moody’s Investors Service. In its announcement, Moody’s noted that the upgrades were “prompted by strong residual value performance of the underlying lease contracts and accretion of credit enhancement due to the sequential pay structure in addition to non-declining reserve account and overcollateralization.”

As of writing, TSLA stock is trading at -1.07% at $250.79 per share.

Disclosure: I have no ownership in shares of TSLA and have no plans to initiate any positions within 72 hours.

Tesla (TSLA) shows volatility amid updates to Model 3, S, X prices and variants
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