Unlike all-wheel-drive systems on gas-powered cars, Tesla's system improves speed, acceleration and mileage by optimizing which motor is used, Musk said.
The dual motor version of the P85 performance sedan will have a top speed of 155 mph, compared with the current 130 mph. It will accelerate from 0 to 60 mph in 3.2 seconds, akin to exotic sports cars.
"This car is nuts. It's like taking off from a carrier deck," Musk said at the municipal airport near Los Angeles where another of Musk's companies — the commercial rocket firm SpaceX — is based. The crowd obliged with cheers and applause.
Tesla is also significantly upgrading its safety features through a combination of radar, image-recognition cameras and sonar.
The Model S will right itself if it wanders from its lane and brake automatically if it is about to hit something. Those features are offered on luxury competitors, as well as mainstream brands such as Ford, Hyundai and Toyota.
But Tesla is going a step further. Its new system will move the car over a lane when the driver uses the turn signal. It will also use cameras to read speed limit signs and decelerate accordingly. Volvo has a system that reads signs and alerts drivers if they are over the limit but does not change the speed.
Musk said "auto pilot" does not mean the car could drive itself — as he put it, a driver cannot "safely fall asleep."
Pulling together all the driver-assist features impressed Brian A. Johnson, an analyst with Barclay's. "It's a year ahead of the timeframe I was expecting," he said.
The dual motor will be a $4,000 option on the base and mid-range Model S, which start at $71,000. The base price of the P85 with all-wheel drive — which will be known as P85D — is $120,000.