Tesla Keeps Trying to Get Model 3 Price Down To $35,000

Price cut
Tesla Model 3 on the road (Photo: Reuters)

Tesla, Inc has sliced $1,100 off the price of its mid-range Tesla Model 3 all-electric sedan in a move to shore-up customer loyalty in the face of rising costs. The price cut brings the starting price of the Model 3 to $42,900 before incentives.

This move is Tesla's second price reduction so far this year. Tesla announced a price cut for all versions of the Tesla 3 amounting to $2,000 in January. This move lowered the price of the Model 3 to $42,900, which is nine percent lower than the $46,000 price tag at the end of 2018.

The price drop covers all three versions of the Model 3: rear-wheel drive, all-wheel drive and performance models.

The mid-range Tesla Model 3 has a sticker price of $45,000 when it was launched in October 2018. Tesla later increased the price to $46,000 but was forced to reduce the price by $2,000 to offset the lower federal tax credit.

Tesla said the latest price cut was mostly due to its ending its own referral program on Feb. 1. It said this program was originally intended to boost demand for the Model 3 through word-of-mouth marketing. Unfortunately, the program ultimately cost far more than Tesla realize, said the Verge.

Tesla also said the long waiting list for its electric vehicles meant the program was no longer necessary.

The cheapest Tesla (the standard version) now costs $34,850 with the federal tax credit. This credit, however, is due to be cut in half in July. The loss of the tax credit will effectively add $1,875 to the cost of Tesla's sedans.

Tesla CEO Elon Musk seems committed to attaining the tough goal selling the Model 3 at an unsubsidized $35,000 starting price. Musk has admitted "it's a super hard grind" to reach this price. But this hasn't stopped him from trying.

Industry sources said improved battery cell design is necessary to further reduce battery costs to reach the promised base price of US$35,000.

Tesla will also have to increase the production rate and make manufacturing design improvements r to reduce the price of its cars to the sought after $35,000 target. Musk, has been outspoken about Tesla attaining this goal.

Musk said Tesla ha to achieve greater economies of scale if it wanted to produce the $35,000 version of the Model 3, "and still be a viable company." Unfortunately, Musk made this appeal as he explained the reason why he had to fire more than 1,000 more employees at Tesla's offices and facilities in California.

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