Electric-car maker Tesla Motors (NASDAQ:TSLA) has narrowed down its available Model S battery and motor configurations to just four options: single- and dual-motor 70 kWh configurations, and non-performance and performance 90 kWh dual-motor options. No longer included as a buying option is the company's 85 kWh battery option. The change in available configurations may serve to both increase production efficiencies, boost the company's average transaction price, and make purchase decisions for customers less confusing.

Model S Australia

Model S. Image source: Tesla Motors.

The business case
Here's the range and motor configurations that Tesla is utilizing for its current lineup, as well as starting prices:

Specifications

70 Model S

70D Model S

90D Model S

P90D Model S

Battery

70 kWh

70 kWh

90 kWh

90 kWh

Dual-motor all-wheel drive?

no

yes

yes

yes

EPA-rated range

230 miles

240 miles

288 miles

270 miles

0-60 time

5.5 seconds

5.2 seconds

4.2 seconds

3.2 seconds (2.8 seconds with Ludicrous speed upgrade)

Starting price

$70,000

$75,000

$88,000

$108,000

Previously, Tesla also offered an 85 kWh dual-motor option for a starting price of $85,000. When configuring an 85 kWh dual-motor vehicle, Tesla gave customers an option to purchase a range upgrade for $3,000, which essentially upgraded the Model S to a 90 kWh model.

There are two main benefits for Tesla's business in this new, simpler offering of available Model S battery and motor configurations. First, average transaction prices will likely increase. By removing the middle battery option, Tesla is essentially forcing its customers opting for a vehicle with a bigger battery than its 70 kWh battery to pay an additional $3,000 for the 90 kWh battery.

Second, producing fewer battery configurations could benefit the company's manufacturing efficiencies, and potentially help profit margins improve slightly.

Value, range, or performance
The real benefit, however, may be to the customers. By eliminating the 85 kWh option, Tesla has simplified its offerings. Now, buyers can choose distinctly between maximizing value, range, or performance.

  • Value: For buyers looking for the best value, they can opt for one of the 70 kWh options, which both sacrifice on range compared to the larger battery options, but come at discounts of $13,000 or more to the 90 kWh models.
  • Range: For some buyers where price isn't much of a factor, and who simply want the most range, the 90D Model S is the obvious choice.
  • Performance: Also for buyers where price isn't much of a factor, the obvious choice for those who want maximum performance is Tesla's P90D.

The company has both eliminated and introduced a range of different battery sizes in the past. Previous battery sizes that the company no longer sells include 40, 60, and the 85 kWh options. And Tesla introduced its 70 and 90 kWh options in April and July of last year, respectively.

It's likely that Tesla will continue to experiment with battery sizes. I've even speculated that the company could reintroduce the 60 kWh option at some point -- though in light of this recent simplification to Model S battery options, it doesn't seem as likely anymore. With regards to the larger batteries, Tesla CEO Elon Musk has noted that the company will likely improve range by about 5% annually, on average.

The company's Model 3, which is scheduled to begin sales by the end of 2016, will likely bring back smaller battery options, as Tesla has said the vehicle will have a starting price of $35,000 -- half of the starting price of the cheapest Model S.

Daniel Sparks owns shares of Tesla Motors. The Motley Fool owns shares of and recommends Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.