It comes after similar cuts this week in Singapore, Israel, and European markets, which saw prices for some models drop by as much as 9.8 percent. Earlier in the year, the company started a price war by reducing the prices of its vehicles by some 20 percent, with the Model S and Model X seeing as much as $15,000 being wiped off.
But this round of cuts is focused on Tesla’s most affordable models, with the base Model Y (a new trim added this month) now starting at $46,6990 or $48,630 with shipping and the Model Y Long Range starting at $49,990 or $51,630 including shipping, all before incentives. At the beginning of the year, the Tesla Model Y Long Range — which was also the entry-level product at the time — started at $67,190 before the first round of cuts in January. Meanwhile, the Tesla Model 3 now starts at $39,990 or $41,630 with shipping, before any incentives.
The Model Y will also qualify for federal tax credits to the tune of $7,500, although the base Model 3 is only eligible for a tax break of $3,750. This is due to the base Model 3’s battery cells being manufactured in China. However, the more expensive Model 3 Performance ($52,990 or $54,630 w/ shipping) will qualify for the full $7,500 tax break as its cells are sourced from the U.S.
Some analysts suggest that the American EV manufacturer is trading margins for volume in a bid to stimulate demand. Additionally, the cuts come on the eve of Tesla’s first-quarter earnings call, in which CEO Elon Musk is expected to participate. Musk has previously claimed that the price cuts are important to maintain the company’s sales growth.
According to Reuters, Wall Street expects the company’s gross margin to hit a three-year low of 23.2 percent, according to a Visible Alpha survey of market analysts. Profit is expected to rise 24.2 percent year-on-year, with a slight drop of 2.4 percent in the last three months attributed to price cuts.
This may not even be the last round of cuts we see this year, with analysts assuming that the price cut campaign will continue as software sales and lower lithium prices help drive up profitability.
