Tesla (NASDAQ: TSLA) has raised the prices of its Model X vehicles in the United States by $5,000, marking the latest adjustment in its fluctuating pricing strategy.
The base Model X all-wheel drive now costs $84,990, while the high-performance Plaid variant has risen to $99,990.
This follows a similar $5,000 price increase for the Model S in December 2023 and a broader hike across all models in Canada from 1 February 2024.
The increase comes as Tesla navigates an evolving electric vehicle (EV) landscape characterised by slowing demand, intensifying competition, and pressure on profit margins.
Unlike previous price reductions, which were aimed at maintaining market share, this latest move suggests a strategic recalibration as Tesla balances affordability with profitability.
Tesla Model X price hike
Tesla’s decision to raise prices comes amid a broader industry shift where automakers are struggling to maintain EV demand.
The company previously engaged in aggressive price cuts throughout 2023, slashing the cost of its vehicles by as much as 25% to counter slowing sales.
Even in 2024, the company cut prices to stay competitive. In April last year, the Elon Musk-led company cut prices is the US, China, and German markets.
These reductions impacted Tesla’s profit margins, prompting concerns among investors about long-term sustainability.
The latest price hike suggests that Tesla is adjusting its pricing strategy to regain lost margins while gauging market elasticity.
The Model X, Tesla’s flagship SUV, is positioned as a premium offering, giving the company more flexibility to increase prices without significantly dampening demand.
Given that luxury EV buyers are less price-sensitive compared to those in the mass-market segment, Tesla may be testing the extent to which it can offset lower sales volumes with higher per-unit profits.
EV market headwinds complicate Tesla’s strategy
Tesla’s price increase also coincides with challenges facing the broader EV sector.
While the company has benefited from declining raw material costs—especially in lithium and other battery components—demand for EVs has softened in key markets, including the US and China.
Rival automakers such as Ford, General Motors, and Rivian have scaled back their EV production targets, citing slower-than-expected consumer adoption and infrastructure limitations.
Tesla itself has tempered its expectations for growth, with CEO Elon Musk warning of potential production slowdowns in 2024 due to economic uncertainties.
In addition, Tesla’s competitive positioning has been under pressure from emerging Chinese EV manufacturers such as BYD, which recently overtook Tesla in global EV sales.
This has forced the company to make strategic adjustments, including focusing on cost efficiencies and exploring new revenue streams such as full self-driving (FSD) subscriptions.
What’s next for Tesla’s pricing strategy?
Tesla’s history of frequent price adjustments suggests that the company remains highly responsive to market conditions. While recent price hikes indicate an attempt to improve margins, further adjustments could be on the horizon, particularly if demand continues to fluctuate.
In the past, Tesla has used price cuts as a lever to stimulate sales, especially during weaker economic periods.
However, with ongoing investments in new manufacturing capabilities—such as the Gigafactory expansion in Mexico—Tesla may seek to stabilise pricing and shift towards long-term cost reductions rather than aggressive discounting.
For now, Tesla’s Model X buyers in the US will have to pay more, but whether this signals a broader shift in Tesla’s pricing strategy remains to be seen.
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