Tesla unveiled an $80,000 “budget” version of its Tesla Model X SUV Tuesday as the company struggles to sell cars and burns through cash at an alarming rate.
The original Model X was released earlier this fall and costs $132,000, but Tesla knocked the price down to $80,000 if you are willing to wait until late-2016 and settle for downgraded features, according to Market Watch.
Model X buyers can get a $7,500 federal tax credit as well as state subsidies for buying the electric car, but even with subsidies Tesla’s product remains extremely expensive. Tesla saw early success as a niche car for the wealthy, but faces problems when it comes to expanding into the broader market.
“They have to become a car manufacturer,” Jim Chanos, founder and president of Kynikos Associates, tells Bloomberg. “Becoming a car manufacturer is a lot more difficult than becoming a high-tech darling.”
Tesla issued a voluntary recall Friday of its Model S due to numerous consumer complaints and repair issues. Last month, Consumer Reports magazine pulled its glowing endorsement of Tesla over these issues and downgraded the company’s overall reliability rating.
Tesla needs to lower its vehicle prices while simultaneously boosting its production capacity if it wants to break into mainstream car markets. The company is burning through cash, posting a $900 million loss in revenue over the last year, reports International Business Times. The company has been able to weather the storm through stock buybacks, but experts warn Tesla must prove itself sustainable soon or risk losing investor confidence.
Sales for Tesla have grown over the last year up to 52,000 from 33,000 sold in 2014, but the company is a long way off from its targeted goal of 500,000 annual cars sales by 2020. If Tesla wants to meet the goal it promised investors it will need to boost production by 862 percent, according to International Business Times.
“Tesla is running out of cash, but I’m sure they’re going to issue more stock,” Vahan Janjigian, chief investment officer at Greenwich Wealth Management tells International Business Times. “The question is when do we reach the point where investors question the value of the stock.”
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