Tesla has cut prices again, with brand new cars now starting under $40,000

Tesla has applied a new wave of price cuts to its Model 3 and Model Y cars. It’s the second time this month that electric cars have started below $40,000 before incentives.

After consistently and gradually increasing the prices of its electric vehicles over the past two years, Tesla began reducing those prices in 2023 to keep up with demand.

It started with a big price drop in early January and then some smaller price adjustments since the latest came in February for the Model 3 and Model Y, and last month for the Model S and Model X.

We thought Tesla was going to take a break from cutting prices, but the automaker slashed prices across its entire lineup again earlier this month.

Now, just a few weeks later, Tesla is once again cutting the prices of the 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 car, went from $41,990 to $39,990.

This is the first time in a long time that Tesla has had an electric vehicle starting at less than $40,000 for a brand new vehicle to order.

However, it is important to note that in this case, this is the only Tesla model for which the federal tax credit is reduced from $7,500 to $3,750 after the battery source requirements.

Tesla appears to be trying to counter the reduced incentives with direct price cuts.

The Model 3 Performance remains the same price, and Tesla has not yet reopened orders for the Model 3 Long Range in the US.

Tesla Model Y prices

In this new pricing update tonight, Tesla has significantly reduced Model Y prices across the lineup.

The price of each option dropped by $3,000 overnight:

  • Model Y AWD: went from $49,990 to $43,990
  • Model Y Long Range: down 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 government incentives, the Model Y will start around $35,000 for a brand new car.

Electrek’s Take

It’s hard to overstate how drastic Tesla’s price cuts have been over the past few months.

Just a few months ago, Tesla was selling the Model Y Long Range for $66,000 in the US, but after several waves of price cuts over several months, it’s below $50,000 for the first time, and that’s before a relatively new federal price of $7,500 tax credit.

Although some die-hard Tesla fans or investors would have us believe that it’s all part of Tesla’s mission to make electric cars more affordable, these price cuts are really due to falling demand.

Tesla’s goal is to sell all the cars it makes. If it could sell them at a higher price, it would and has done so in the past. Yes, there may be some cost improvements as well, but not $16,000 worth or 24% in just a few months.

Demand is not matching Tesla’s increased production rate.

To be fair, it’s not entirely Tesla’s fault, as current interest rates make new car purchases more difficult right now.

Either way, it’s something to keep an eye on.

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