$300 4TF watered-down version of the XSX vs $400 10.3TF version of the PS5 with the only difference being a disc drive?
I said this before this reveal, that the XSS would be in the $300 - $350 range and would likely be all digital, and even then, I said the only thing sony needs to worry about is not having a $399 console.
The XB1 has been at a lower price than the PS4 (albeit unofficially) all of this generation and that didn't stop the PS4 from outselling it. A $100 difference is not going to suddenly make someone that wants a PS5 to go and get an XSS instead. Especially when for that $100 more with the PS5AD, you get a larger SSD and almost 2.5x the power.
I also said this before, the last thing S would want, is a $399 10TF PS5 that falls in the middle of their $299 4TF offering and their 12TF $499 offering. The XSS existing at $299 actually makes a $399 appear to have the better value and a $499 XSX be too expensive.
If however the cheapest PS5 you can buy costs $449/$499 (which as I also said before would be dumb on sony's part if there is a $299 XSS on the market), then you can kiss all this goodbye and then in that case you would have a decent fight on your hands in some territories.