(Reuters) -Tesla on Monday launched cheaper variants of its Model S sedan and Model X SUV with shorter driving ranges in the U.S., looking to increase sales as high borrowing costs hamper demand for expensive electric vehicles.
Tesla shares were down 2.6% on Tuesday, while rivals also lost ground as investors worried about a price war. Rivian fell by 3.5% while Lucid lost 5.6%.
Tesla has already slashed prices of its vehicles in the U.S., China and other markets, prioritizing sales growth over profit margins.
The Austin, Texas-based company has also offered other incentives to reduce inventory in a strategy that CEO Elon Musk said was part of Tesla’s recession playbook.
The new S and X “standard range” models are priced at $78,490 and $88,490, respectively.
Model S has a driving range of up to 320 miles (515 km), lower than the regular dual motor and tri-motor Plaid variants that offer up to 405 miles and 396 miles, respectively.
Model X SUV has range of up to 269 miles, well below its more expensive versions that offer up to 348 miles.
Both models will have the same battery and motors as the dual motor variants that cost $10,000 more, but their performance and range will be limited by software, a Tesla sales representative said.
Another sales representative said Tesla does not have a plan to offer a firmware update to unlock the range and performance in the future.
“The idea is to appeal to consumers who are keen for the badge and the EV experience but might be put off by the higher price tag compared to competitors,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown.
Tesla said the new variants will be available for delivery between September and October. The world’s most valuable automaker sold 19% more of its older and higher-end Model X and S in the second quarter.
But it had last month said that lower average selling price and lesser sales of its more expensive models were weighing on its operating income and revenue.
(Reporting by Mrinmay Dey, Abinaya Vijayaraghavan and Akash Sriram in Bengaluru and Hyunjoo Jin in San Francisco; Editing by Muralikumar Anantharaman, Jamie Freed, Arun Koyyur and David Gregorio)