Tesla has implemented another wave of price cuts across its Model 3 and Model Y vehicles. It’s the second time this month, resulting in its electric cars starting under $40,000 before incentives.
After consistently and gradually increasing its electric vehicle prices over the last two years, Tesla has started bringing those prices down in 2023 to keep demand up.
It started with a big price drop in early January, and then some smaller price adjustments after with the latest coming in February for Model 3 and Model Y, and last month for Model S and Model X.
We thought Tesla would take a break from reducing prices, but the automaker again slashed prices across its entire lineup earlier this month.
Now just a few weeks later, Tesla is again adjusting prices down on Model 3 and Model Y in the US, and not by a small amount.
Tesla Model 3 prices
The Model 3 Standard Range RWD, Tesla’s cheapest vehicle, went from $41,990 to $39,990.
It’s the first time in a long time that Tesla has an electric vehicle starting at less than $40,000 for a brand-new vehicle to order.
However, it’s important to note that in this case, this is Tesla’s only model to have seen its federal tax credit being reduced from $7,500 to $3,750 following the battery source requirements.
It appears Tesla is trying to counter the reduced incentive with a direct price cut.
The Model 3 Performance is staying the same price and Tesla has yet to reopen orders for the Model 3 Long Range in the US.
Tesla Model Y prices
In this new price update tonight, Tesla has greatly reduced Model Y prices across the entire lineup.
Each variant saw its price cut by $3,000 overnight:
- Model Y AWD: went from $49,990 to $46,990
- Model Y Long Range: went from $52,990 to $49,990
- Model Y Performance: went from $56,990 to $53,990
Unlike the Model 3, all new Model Y vehicles qualify for the full $7,500 tax credit. In some markets with state incentives, the Model Y will start at around $35,000 for a brand-new vehicle.
It’s hard to overstate just how drastic Tesla’s price cuts have been over the last few months.
Just a few months ago, Tesla was selling the Model Y Long Range for $66,000 in the US, but after now several waves of price cuts over a few months, it is under $50,000 for the first time, and that’s before a relatively new $7,500 federal tax credit.
Despite some of the staunchest Tesla fans or investors trying to make us believe that it’s all part of Tesla’s mission to make EVs more affordable, these price cuts are indeed due to demand going down.
Tesla’s goal is to sell all the vehicles it produces. If it could sell them for a higher price, it would and it has in the past. Yes, there might be some cost improvements involved too, but not $16,000 or 24% worth in just a few months.
It’s demand not matching Tesla’s increased production rate.
To be fair, it’s not all Tesla’s fault since the current interest rates are making all new car purchases more difficult right now.
Either way, it’s something to keep an eye on.
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