Why Tesla continues to make the Model S and X even as sales decline

() — A decade ago, the Tesla Model S was MotorTrend’s Car of the Year and was hailed by Consumer Reports as the best car it had ever tested. It was so good that Consumer Reports had to rethink its own rating scale because the Model S was literally off the charts.

The speed, comfort and technology of the Model S were unmatched in the industry. Tesla designers took advantage of the compact nature of electric powertrains—no bulky motors or batteries that sit snugly in the ground—to create a car so extraordinarily spacious that it even featured rear-facing seats in the back. .

Production ramped up slowly, but by 2017 Tesla was already selling more than 100,000 units a year of the Model S and its SUV sibling, the Model X. But once the Model 3 and its SUV counterpart, the Model Y, arrived, sales of the
Larger and much more expensive Teslas dropped dramatically.

It is easy to understand why. The 3 and Y models are much more affordable. Today, a Model 3 starts at around $40,000. The Model S costs about $88,000. Similarly, pricing for the Model X SUV starts at about $98,000, while the smaller Model Y only costs $47,000.

Add to this that, compared to most car models, the Model S and X are well past retirement age, and it’s no wonder they account for such a small part of Tesla’s annual sales, around 5 % last year.

This raises a question: why does Tesla keep making them instead of abandoning them to focus on more popular alternatives? The answer is simple: These older models continue to provide reliable profits, and that may be even more necessary now that Tesla resorts to cutting prices to boost sales.

Time to retire?

Aside from the passing of the years, the Model S is no longer as good as it was when it was considered the best ever, says Jake Fisher, Consumer Reports’ head of auto testing, and not just because it’s getting older while its competitors push products out a lot. newer. In reality, Tesla has made the Model S worse, he said, chasing raw performance numbers at the expense of comfort.

A Tesla Model X Plaid, a super-fast new version of the SUV. Credit: Liu Ranyang/China News Service/VCG/Getty Images

“I’m sure the car can do more laps around the Nurburgring, but the driving is worse and noisier,” says Fisher. “They have made concessions to get the most out of it, but that makes the car less livable.”

Tesla, which does not usually respond to inquiries from the media, did not reply to emailed questions about the Model S and X.

However, like the Mercedes-Benz S-Class, the Model S remains Tesla’s flagship and represents the brand.

“The Model S was the car that put Tesla on the map,” said Brian Cox, executive editor of Autotrader. “It’s the Model S that showed American buyers what’s possible in an electric car, what they really wanted from an electric car.”

Also, while sales may be small compared to the Model 3, that’s not really a normal way to look at these things. Mercedes-Benz also sells far fewer S-Class sedans than the more affordable C-Class. But Mercedes isn’t going to stop making the S-Class.

In fact, within their competitive class, the Tesla Model S and X are good sellers. Last year, they vastly outsold luxury electric vehicles in a similar price range, such as the BMW i7, Audi E-tron and Mercedes EQS, according to data from Cox Automotive.

All of these vehicles are much newer than the Tesla S or X, but when it comes to profitability, age has its advantages. By this point in their long lives, the Tesla Model S and X have become a fairly steady stream of profits, according to Cox.

income stream

A large portion of the costs associated with introducing a new car or SUV accrue before the vehicle goes on sale. It costs a lot to design and develop the new model and much more to set up a factory to build it. The money starts coming in when the vehicle goes on sale.

The longer an automaker can keep selling the same model, the more money it can make on that huge initial investment. And it’s money that Tesla can use to push forward with new projects, like the Cybertruck.

Among conventional cars, a life cycle of five or six years is quite common. Eight years is an exaggeration, but hardly unheard of. Ten years is more typical for specialty models, such as exotic cars that are sold in small numbers.

In that period there is usually a “mid-cycle facelift”, with slight cosmetic changes and technological improvements, so that it can be sold as a “new model” before the manufacturer has to invest in a truly new model.

There are exceptions. The Toyota Tacoma pick-up has been without major changes for 18 years. (A new version is expected soon.) The Dodge Challenger has spent 15 years without its sales figures suffering. Last year it outsold the Ford Mustang. So there is something in favor of sticking with what works.

But Ed Loh, MotorTrend’s senior vice president of content, thinks Tesla may go out of style if it doesn’t make at least some significant design changes. (MotorTrend, like , is part of Warner Bros. Discovery.)

“It looks futuristic, it looks vintage. It’s not dated at all, despite being a 10-year-old car,” he said. “That said, I think they’re probably leaving a lot on the table by not changing the design.”