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Tesla Revamps Model S as Competition in Premium EV Race Heats Up

Tesla revealed its Model S Plaid model at an event yesterday. The high-end electric car would be pitched against other luxury models.

The Model S along with Model X are among the older models in Tesla’s portfolio. The company did not produce these in the first quarter of 2021 as it was working to revamp the models. While the Model S/X are believed to be the more profitable models for Tesla, their share in total deliveries has been falling gradually even as the sales of more affordable Model 3 and Model Y are rising.

Tesla launches Model S Plaid

The Model S Plaid has a range of 390 miles and can accelerate from zero to sixty miles per hour in only two seconds. The specifications make it Tesla’s fastest car. The company also increased the price for the model and it would now start from $130,000. The model was initially set to be delivered in February but got delayed.

“We’re in production and gonna deliver the first 25 cars now, and then basically should be at several hundred cars per week soon and a thousand cars per week next quarter,” said Tesla’s CEO Elon Musk.

Tesla increasing vehicle prices

Notably, Tesla has had to increase vehicle prices several times this year amid rising input costs. Prices increasing due to major supply chain price pressure industry-wide. Raw materials especially,” said Musk in a tweet in response to the price hikes.

It has also taken some other cost-cutting initiatives and has done away with the lumbar support in Tesla Model Y. According to Musk, “Moving lumbar was removed only in front passenger seat of 3/Y (obv not there in rear seats). Logs showed almost no usage. Not worth cost/mass for everyone when almost never used.”

Input costs are rising

Higher input costs could play havoc with Tesla’s profitability. Despite making millions every quarter from the sales of carbon credit, Tesla’s net profit margin was only about 4% in the March quarter. Incidentally, if we remove the carbon credits and the $102 million gain that Tesla made on the sales of bitcoins in the quarter, the company actually would have posted a GAAP net loss in the quarter.

Electric cars

Musk has been championing the cause of electric cars. Until about a couple of years back, electric cars were seen as a fad. Mainstream automakers did not saw much value in electric cars and had a couple of electric models in the portfolio for the namesake.

However, things have changed over the last two years and now every automaker is focusing on electric cars. General Motors has committed itself to a zero-emission future by 2035. Other auto companies also have outlined aggressive plans to electrify their fleet.

At the event to reveal the Model S Plaid, Musk said that “There is something that’s quite important to the future of sustainable energy, which is that we’ve got to show that an electric car is the best car, hands down.”

Tesla Model S versus Mercedes EQS

Tesla Model S would compete with high-end electric cars. Mercedes will start delivering the all-electric EQS Model later this year. There is something that’s quite important to the future of sustainable energy, which is that we’ve got to show that an electric car is the best car, hands down,”

Also, Lucid Motors would start delivering its Lucid Air later this year. The model would be pitched against Tesla’s Model S. Also, NIO would also launch its premium electric cars in the US sometime in the future. The Chinese electric vehicle maker is entering the Norway market, its first market outside of China.

Tesla canceled Model S Plaid plus

Talking of Tesla Model S, the company decided to stop the high-end Plaid+ model as the plaid model “is just so good” according to CEO Elon Musk. The Plaid+ model was expected to have a driving range of 520 miles.

Meanwhile, the competition is heating up in the electric vehicle industry. On one hand, we have established pure-play electric vehicle companies like Tesla, NIO, Li Auto, and XPeng.

We also have a flurry of startup electric vehicle companies that are currently in the preproduction stage. However, over the next two years, we’ll have a lot of new all-electric models from these companies.

Ford

Also, legacy automakers like Ford, General Motors, and Volkswagen have raised their game. Legacy automakers’ all-electric models have received a good response from the market. The latest on the list is the Ford F-150 Lightning Model which has received very good reviews. The ICE (internal combustion engine) model was America’s best-selling pick-up for the last many years and the new all-electric model looks set to give a tough fight to other electric pick-up trucks. Canoo has also announced a pickup truck. Tesla’s Cybertruck would also be available sometime next year.

Apple is also said to be working on its own electric car which would be launched by around 2025. However, so far, the company hasn’t been able to partner with any company for the project even as there were reports of it being in talks with Hyundai and Renault.

Tesla stock trading higher

Tesla stock was trading marginally higher in US premarket price action today. Tesla and other electric vehicle stocks have sagged this year even as legacy automakers’ stocks have jumped.

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Mohit Oberoi is a freelance finance writer based in India. he has completed his MBA with finance as majors and also holds a CFA charter. He has over 13 years of experience in financial markets. He has been writing extensively on global markets for the last six years and has written over 6,500 articles. He mainly covers metals, electric vehicles, asset managers, and other macroeconomic news. He also loves writing on personal finance and topics related to valuation.