Tesla Cuts Base Price of Model 3 By $1,000

By · July 17, 2019

Tesla Model 3

Tesla this week cut the price of its Model 3, its best-selling electric model. The price of the Model 3 will drop by $1,000 to $38,990. The Tesla Model 3 so far in 2019 makes up nearly half of all EV sales in the United States, where 45 plug-in models are available.

In addition to lowering the Model 3’s price, Tesla is making a series of other strategic pricing changes. The base version of the Model S sedan is rising from $75,000 to $79,990, while the price of the Model X SUV is increasing from $81,000 to $84,990. Also, Tesla is raising the price of its self-driving package by $1,000 to $6,000.

The company said the price changes were a combination of improving affordability and streamlining vehicle trim packages. Tesla is also under pressure to maintain demand for its cars after the federal tax credit dropped on July 1 from $3,750 to $1,875. Tesla is one of the few automakers that reached the limit of 200,000 sales, after which the tax credit is reduced over time. The tax credit for Tesla cars completely disappears starting Jan. 1, 2020.

Tesla has sold approximately 67,650 units of the Model 3 in the United States so far this year. The next best-selling EV in 2019 is the Tesla Model X at 9,000 sales.

The breakneck speed of Model 3 production has raised some concerns about the quality of production. A handful of employees said this week that they were forced to cut corners and to work in unsafe conditions. Five people told CNBC that achieving the demanding rate of producing 2,160 Model 3 in a six-day workweek required them to pass cars down the production line with missing bolts, nuts, or lugs. A Tesla spokesperson said the employees’ reports were misleading.

Tesla's website indicates that the $6,000 AutoPilot feature includes the “Full Self Driving Computer.” The site adds that “Full Self-Driving Capability is available for purchase post-delivery, [and that] prices are likely to increase over time with new feature releases.”

CEO Elon Musk said the price of Tesla’s self-driving technology would continue to rise—as the company’s cars become “appreciating assets.” His statement is based on Tesla’s optimistic plan to enable a full self-driving mode and deploy a fleet of robotic taxis allowing owners to earn revenue from the vehicle.

Analysts believe that price increases would make sense if Tesla cars with self-driving features indeed become appreciating assets. However, Tesla’s vehicles currently remain depreciating assets like all other cars.

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