Tesla has raised US prices on its two most expensive models, hours after shares fell following concerns its aggressive price-cutting policy is eating into profits.
The electric-car maker has been bringing down prices in the US this year in order to drive demand and help fill its factories in California, Texas, Germany and Shanghai.
The move has triggered fears of a broader price war in the electric vehicle market, putting pressure on thin profit margins that established car brands are making on their battery models.
Tesla shares dropped almost 10 per cent on Thursday after the company said it missed profit expectations for the first three months of the year because of the price reductions.
Chief executive Elon Musk also indicated the company was prepared to tolerate thinner profit margins in future to drive higher market share.
Tesla has an unofficial target of selling 20mn vehicles a year by 2030, an ambitious goal that would make it larger than industry leaders Toyota and Volkswagen combined.
But the price-cutting strategy has prompted warnings from rivals. Renault said reducing prices damaged the long-term residual values of vehicles that are used to determine leasing rates and will lead Tesla into a “spiral”.
Thierry Piéton, finance boss of the French carmaker, said: “There is no big incentive to go cut the prices and kill the residuals and go into a spiral that some of the competition has done. If it results short term in slightly lower volume, so be it.”
Tesla raised prices on the Model S and X in the US by $2,500 on Thursday, partly reversing a larger cut made earlier in the month.
It means the Model S begins at $87,490 while the Model X sport utility vehicle is $97,490. Both models are still cheaper than they were at the end of March.
Earlier in the week the brand also lowered prices on its cheaper 3 and Y models, its second cut this month as it tries to stimulate demand.
Tesla differs from many established carmakers by setting prices centrally and tinkering with them periodically, rather than allowing individual dealers to haggle or offer discounts. This leads to periodic price moves that are more visible than price fluctuations at other brands.
There is already evidence that Tesla’s cuts in the UK have affected the resale value of its vehicles, which have been losing value much faster since the start of the year than in the past, and when compared with rivals.
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