In a marketplace that’s becoming increasingly saturated with electric vehicles (EVs), Tesla continues to make bold moves to maintain its stronghold. Recently, the automaker introduced price reductions on certain Model 3 and Model Y variants in the US, marking its second price cut within a span of just over a month. This decision follows a less-than-expected delivery performance, as reported by CNBC.
The updated pricing on Tesla’s website now puts the Model 3 at a more attractive starting point of $38,990, down from the earlier $40,240 tag. The Model 3 Long Range now stands at $45,990, a cut from $47,240, while the Performance variant is now priced at $50,990, down from $53,240. The price reduction wave also touched the Model Y Performance SUV, bringing its price down from $54,490 to $52,490.
These latest price drops in April 2023 represent Tesla’s third round of reductions already in 2023, following even steeper cuts in March and September 2022. Since January, prices on the Model 3 and Model Y have fallen by about 17% and 26% respectively. Such aggressive price slashing is unprecedented in the auto industry and points to a deliberate strategy by Tesla.
By reducing prices, Tesla aims to boost demand and prioritize market share and sales volume over short-term profits. As CEO Elon Musk stated, “I think it does make sense to sacrifice margins in favor of making more vehicles.” This ethos aligns with a broader focus on increasing production capacity and capturing larger market share, even if it sacrifices near-term profitability.
The new pricing puts Tesla vehicles in direct price competition with gas-powered cars. For example, the Model 3 now starts at $6,500 less than the BMW 3 Series, a key rival. Factoring in incentives and fuel savings, the Model 3 has total ownership costs comparable to conventional mainstream options like the Toyota Corolla.
Similarly, the Model Y SUV now has a base price $3,700 below the average new car transaction price of $48,000 in the US. Tesla has also reduced prices on its luxury Model S and Model X to their lowest points ever compared to average vehicle prices. This positions Tesla perfectly to disrupt both the mass-market and premium segments.
Some analysts attribute the need for incentives to weakened demand after Elon Musk’s controversial acquisition of Twitter and increased political commentary alienated portions of Tesla’s customer base who disagree with his stances. Tesla also had to adjust prices to compete with rival EV makers who have launched new model lines at affordable price points in recent months.
Nonetheless, Tesla remains upbeat about reaching its 2023 delivery target of 1.8 million vehicles globally. This reiterates its confidence in the underlying demand for EVs and suggests short-term discounts will be effective in boosting purchase rates. As the EV market evolves, expect Tesla’s pricing strategy to remain dynamic, fluctuating in response to competition and economic conditions.