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Elon Musk cancels the 500-mile range version of Tesla’s Model S

Elon Musk is pulling the plug on his promised Tesla Model S Plaid+ super car about a year before it was expected to go on sale.

Tesla still plans a “Plaid” version of the car. In a tweet on Sunday, the Tesla CEO said that Plaid+ was being canceled because there was “no need, as Plaid is just so good.”

But Tesla had talked about the Plaid+ being able to go more than 500 miles on a single charge, while the standard Plaid version is advertised as being able to go 390 miles. Both versions were to have three motors, more than the two in other top-end versions of the Tesla. And Tesla said both Plaid and Plaid+ would be able to accelerate from 0 to 60 in about 2 seconds, making them the fastest production cars ever.

The Plaid+ was set to be $30,000 more expensive than the standard Plaid version, costing just under $150,000. All the versions of the Model S and the high-end Model X SUV together represented only 11% of Tesla sales last year, with the lower-priced Model 3 sedan and Model Y SUV becoming the mainstays for the company. But the Model S and Model X likely have better profit margins than the Model 3 and Model Y, making them important models for Tesla’s lineup.

Trouble for Tesla?

The delays in the new versions of the Model S and Model X, and the dropping of the highest end version of the Model S could point to some troubles at Tesla.

“This is not the news that Wall Street wanted to hear,” said Daniel Ives, tech analyst at Wedbush Securities. “At the surface the excuse makes sense, but it also feels like ‘The dog ate the homework.'”

Shares of Tesla were slightly lower in premarket trading Monday.

Typically, a redesign of a new version of a car takes production offline for a matter of weeks. But Tesla didn’t make any Model S sedans or Model X SUVs in the first quarter of the year and it is only now rolling out a redesigned version of the car.

An unveiling of the new Model S, with a distinctive rectangle open steering wheel rather than the traditional round steering wheel, had been set for June 3. But that was pushed back to June 10 because Musk announced last week it needed some last minute tweaks.

The entire auto industry has been struggling with a shortage of computer chips that has caused plants to shut down and automakers to shift what supply of chips they had to their best-selling vehicles. Musk told investors in April that the shortage of computer chips was a “huge problem.”

Last week Musk tweeted that rising costs of raw materials was leading to price increases for the Model 3 and Model Y. The price of the upper end Model S and X were not increased, though.

“At the high end the Plaid+ was niche demand to begin with but the chip shortage has forced Musk & Co. to make some tough choices on the production front,” Ives said. “The last few months have been choppy for Tesla and this adds to the overall agita.”

Musk did not identify which raw material prices were causing problems. Prices for lithium, a key material used in EV batteries, have more than doubled in trading markets. Cobalt, another key material for batteries, is also sharply higher though it has retreated from a high earlier this year.

How much Tesla is paying for those raw materials under its supplier contracts is unknown. The same is true for metals used elsewhere in the car, such as steel, aluminum and copper, which have also seen in prices traded in public markets rising.

The unusual “Plaid” name comes from “Spaceballs,” a 1987 Star Wars parody from director Mel Brooks. In “Star Wars,” when spacecraft enter hyperspace, the stars appear to become streaks of light. In Spaceballs, the spacecraft go even faster and the stars turn plaid.

Article Topic Follows: Biz/Tech

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