When Tesla (NASDAQ:TSLA) first launched its Model X last month, the media was initially taken aback by the company's pricing of the SUV. But for those familiar with how Tesla prices its vehicles, there were no surprises. Indeed, Model X pricing is about exactly what the CEO has promised for years. Going even further, the company's pricing for the new car is actually aggressive, suggesting Tesla wants to move some serious volume in 2016.
The truth about Model X pricing
The first thing investors should get straight is that Tesla has already introduced a Model X version that should cost around $40,000 less than the fully loaded "Signature" P90D version of the SUV the media is mistakenly referring to as the current base model. Tesla has already introduced a 90D model.
Based on a handful of comments from Tesla CEO Elon Musk, Model X should have a starting price around $88,000. The main savings when purchasing a 90D compared to the fully loaded P90D Signature model will come from not choosing to upgrade to the performance motor configuration (hence the P in P90D).
Tesla's public relations representative Alexis Georgeson confirmed with The Motley Fool that any references to $132,000 as the base price for Model X are off considerably.
"Signature Model X, the first 1,000 vehicles produced which are fully loaded and already sold out are $132,000," she explained. "This is not the base price for Model X ... and our Model X 90D will only cost slightly more than the Model S 90D."
Tesla's Model X pricing plan
While an estimated price tag of $88,000 for the 90D is still a very high price tag compared to most cars, it's not bad for the world's first high-end, fully electric SUV. Tesla's Model S, which is outselling every other luxury sedan (gas, hybrid, or electric) in North America, is priced from $70,000 to $145,000, depending on battery and motor configurations and other upgrades.
But when you consider Tesla's future plans for Model X pricing, it's clear the company wants to ramp up sales of the SUV significantly this year.
Prices for the SUV are going to continue coming down throughout 2016.
"And we'll have a version that's still on the expensive side but before any incentives will be about $75,000 next year," Musk said during a recent Vanity Fair interview. This would put Model X pricing on par with the base model of Model S with dual motor. While Model S rear-wheel-drive versions start at $70,000, all-wheel-drive dual-motor models start at $75,000.
A $75,000 price tag for Model X is particularly aggressive when you realize the company had generated about 25,000 orders for the vehicle ahead of its launch without any advertising. For perspective, 25,000 is equal to half of Tesla's expected total sales in 2015. Considering there is so much pent-up demand for Model X, the company would likely keep prices high if it wasn't expecting a rapid ramp-up in production during 2016. But with a pricing strategy this aggressive, Tesla is likely expecting to fulfill a good chunk of these orders during the first half of next year.
Is it possible Tesla's investments in Model X production and the company's expectations for the SUV are more considerable than the Street realizes?