Cheapest Tesla Gets More Range, Higher Price in Lineup Shift

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Tesla’s Model S Sales Soar as Lineup Gets Shifted

Buyers seeking the least-expensive Model S from Tesla Motors Inc. will have to purchase an all-wheel-drive car with a higher price and more range. The luxury-car maker is dropping its Model S 60 and replacing it with a version called the 70D.

The 70D, which starts at about $75,000, has a U.S. Environmental Protection Agency-rated range of 240 miles (386 kilometers), compared with 208 miles for the Model S 60, which started at about $70,000, according to Associated Press.

All-wheel drive is a relatively new feature for Tesla. After teasing on Twitter last fall about plans to reveal “the D,” the company said it stands for a dual-motor system, which allows for all-wheel drive. That capability is highly valued by luxury-car buyers, especially in the U.S. Northeast, where winter weather can be harsh.

“In retrospect, it was remarkable how much market share TSLA rear-wheel-drive vehicles seem to have taken from its all-wheel-drive luxury peers,” James Albertine, an equity analyst at Stifel Nicolaus & Co., said in an e-mailed statement. “This is akin to TSLA fighting with one arm tied behind its back, in our view, which is perhaps another indication that TSLA demand may be stronger” than implied by growing sales during the past three years.

Albertine rates Tesla stock a buy and projects that the shares will reach $400 within a year. The shares rose 2.2 percent to $207.67 at the close in New York and have fallen 6.6 percent this year.

Cutting Costs

Making all-wheel drive standard for all Tesla cars will help cut manufacturing costs, since the company has slated the Model X sport utility vehicle, which will begin sales later this year, to offer only four-wheel drive, said Theo O’Neill, an analyst at Ascendiant Capital Markets. Tesla can also save on expenses by sourcing more of the same parts, he said in a phone interview.

“They’re able to get better experience in terms of building up all-wheel-drive vehicles,” said O’Neill, who rates the shares buy and has a 12-month target price of $320. “If customers prefer the four-wheel drive, and they’re trying to standardize on the four-wheel-drive version, then everybody comes out a winner.”

Faster, Too

The Model S 70D can reach 60 miles per hour in 5.2 seconds and tops out at 140 mph, the Palo Alto, California-based company said in an e-mailed statement. The upgrades on the base car should make it more competitive against other luxury vehicles, including Mercedes-Benz’s E-Class, Ben Kallo, an analyst at Robert W. Baird & Co., said in in a note. He rates Tesla stock outperform, with a 12-month target price of $275.

Still, wealthy buyers will probably prefer the higher-end versions with a longer range that they find to be worth the added expense, Jack Nerad, an analyst at KBB.com, said in an e-mailed statement.

“Most Tesla buyers will continue to step up to the top-level versions of the car,” Nerad said. He added that “the Model S is now firmly ensconced as a luxury vehicle.”

Tesla said on April 3 that it sold 10,030 Model S cars in the first quarter, a 55 percent increase from a year earlier. It was the first time the youngest and smallest publicly traded U.S. automaker had reported quarterly vehicle sales outside of earnings.

Chief Executive Officer Elon Musk last month said in a Twitter posting that Tesla would reveal “a major new product line -- not a car” on April 30. The announcement probably will be related to stationary storage batteries for residential customers, Trip Chowdhry, an analyst at Global Equities Research, said in a note.

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