Teslas Pricing Strategy and Learning Effect

Here's a brief timeline of the pricing history of the Tesla Model 3:

• March 2016: Tesla unveils the Model 3 with a starting price of $35,000 before incentives. This was the base price announced during the initial launch event.
• July 2017: The first Model 3 units are delivered to customers. At this time, Tesla offers two variants: the Standard Range with a starting price of $35,000 and the Long Range with a starting price of $44,000.
• February 2019: Tesla announces a $2,000 price reduction for all Model 3 variants, citing the end of the company's customer referral program.
• April 2019: Tesla introduces the Standard Range Plus variant, priced at $39,500, featuring additional features and improved range compared to the original Standard Range.
• October 2019: Tesla lowers the price of the Model 3 across all variants, including a $4,000 reduction for the Long Range variant, which starts at $47,990.
• February 2020: Tesla once again reduces the price of the Model 3. The Standard Range Plus is priced at $37,990, the Long Range at $46,990, and the Performance variant at $54,990.
• October 2020: Tesla announces a significant price reduction for the Model 3, reducing the prices by $2,000 for all variants. The Standard Range Plus starts at $37,990, the Long Range at $46,990, and the Performance at $54,990.
• January 2021: Tesla lowers the Model 3 Standard Range Plus price to $36,990, making it the cheapest available variant.

It's important to note that these prices are subject to change and may vary based on configuration, options, and region. Tesla has made several adjustments to the Model 3 pricing over time to adapt to market conditions and manufacturing efficiencies.

Discussion Question:

Teslas stock prices have gone through some dramatic ups and downs recently. The reasons that have been most frequently raised to explain the price fluctuations include Teslas productivity hiccups and price reductions. Based on the Case Study Teslas Learning on Model 3 (assignment in Module 2) and the price changes listed above, give your observations and comments on Teslas decisions to drop prices on its electric vehicles.