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Tesla Motors Declares War on Base Models, Eliminates Cheap Model X60D

Tesla Model 3 (TSLA)

Tesla Motors is a great car company; it has lofty ideals to transition transportation from gas guzzlers to electric vehicles. However, the firm’s execution tends to be a little spotty with an alarming number of misses among it’s hits. The Model X 60D Model just joined the list of failed projects as breaking news revealed that Elon Musk has dropped the entry level Model X 60D from its lineup. The firm doesn’t seem to know how to get its base level models right even though it is kind of hard to pinpoint what exactly goes wrong with those base Models.

The Model X 60D, which was introduced in July was supposed to replace the Model X 70D.  60D was a decent ride with a 75KwH battery software-limited to deliver 60 KwH. The Model X 60D also sports an EPA range of 200 miles on a single charge, 0-60 miles in 6.0 seconds, and a top speed of 130 miles per hour.  The more interesting point is that the car had a starting price of $74,000 before tax incentives.

Tesla Motors Inc (NASDAQ:TSLA)

Here’s why Tesla discontinued the Model X 60D

Tesla Motors was full of praise for the Model X 60D. The firm noted that “in order to bring the benefits of Tesla ownership to even more people, today we’re introducing Model X 60D at a starting price of $74,000 – giving customers the flexibility to choose the Tesla model, price point and range that best fits their lifestyle.” Hence, it is hard to understand why the firm is changing its mind in less than six months.

However, it appears that the Model X 60D occupied a weird position in the market and Tesla probably didn’t sell a strong enough number to justify its existence. The Model X 60D is not a budget vehicle at $74,000 but it is not exactly a 75D or a P90D. Hence, potential buyers of the Model X were more likely to go all the way to buy a 75D or P90D.

Conversely, the “budget” EV buyers are more likely to opt for a Model S 60D, which sells for $66,000. More so, almost 400,000 buyers are waiting for the mass-market Model 3. Interestingly, Tesla has been successful in encouraging some Model 3 buyers to move up the rungs for the entry level Model S 60D. However, the firm can’t seem to get people to embrace the Model X 60D. In essence, the Model X 60D is neither here nor there and Tesla apparently made a smart decision to ax the car from its lineup.

Is Tesla pricing buyers away from its cars?

Tesla Motors has been making strategic moves to increase the price of its vehicles in a bid to increase margins. The Model X60D is more or less a subsidized version of the top-end versions of the Model X; hence, it is logical to conclude that the car is a drag on margins.

Now, the cheapest version of the Model X available is the 75D, which costs about $85,000 before tax credits. Of course, Tesla fans can argue that people who can no longer afford a Model X because the 60D is no longer available might not have been in the financial position to buy a Model X to begin with.

However, irrespective of what critics think, Tesla is trying to create a marked distinction between the prices of the Model S, Model X, and the Model 3. You shouldn’t be surprised if Tesla also discontinues the Model S 60D before the debut of the Model 3. Hence, the Model 3 will be entry level version, the Model S, will be the mid-level model, and the Model X will be the top end model.

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Victor Alagbe is a seasoned business and finance writer with a specialty in writing about how to invest for the long-term in healthcare, pharmacology, energy and tech stocks. His long-term focus is on stocks that provide a nice mix of growth and income. For the short term, he passionately writes about trading stock options for the excitement and leverage that stock options offer.