For the second time in barely more than a month, Tesla has cut the price of its entry level Model 3.
On Jan. 1, the company cut prices $2,000 on all its models to partly compensate for a $3,750 reduction in the federal tax credit its buyers can receive. (Tesla's tax credits are phasing down as originally scheduled after it reached 200,000 sales last year.) Last week, it revealed a $1,000 price cut on Model S and Model X.
Now the company has also cut prices by $1,100 on the Model 3. The move comes after the company ended its customer referral program in January, which offered buyers free access to the company's Superchargers for three months. CEO Elon Musk said that program was more expensive than anticipated.
Following the price cut, Musk also tweeted Tuesday night that "Model 3 starting cost [is] now ~$35k (after ~$8k of credits & fuel savings)."
Model 3 starting cost now ~$35k (after ~$8k of credits & fuel savings) https://t.co/46TXqRrsdr— Elon Musk (@elonmusk) February 6, 2019
Tesla, along with its buyers, has been targeting a $35,000 base price since it first announced the Model 3 in 2015.
According to Tesla's website, the cheapest Model 3 now sells for $44,100 after delivery charges.
On its website, the company has long quoted lower prices that deduct the federal tax credit along with thousands of dollars in company-estimated fuel savings. Those fuel-savings estimates assume that Tesla owners get electricity for free, and don't reflect fluctuating gas prices. But when Musk first announced the Model 3, he said the $35,000 price target would come before those deductions.
Hundreds of thousands of buyers gave Tesla $1,000 deposits to reserve a place in line to buy the Model 3. Following its typical practice, the company started production with higher-priced, more lavishly equipped versions, then gradually released lower-priced models.
In November, the company released a cheaper Mid Range version with a smaller battery pack and 264 miles of estimated range, for a little more than $47,000 at the time. That's the car that now costs $44,100.
Yet Tesla acknowledged in an earnings call last week that a large portion of those deposit holders still haven't ordered their cars, meaning that many of them could still be waiting for even more affordable versions.
The Model 3 Mid Range includes a Premium Interior Package with leather seats, a panoramic glass roof, premium stereo, and other amenities that the company originally valued at $5,000.
After the remaining tax credit, buyers can drive home a Mid Range Model 3 for $40,350. In that sense, Tesla is getting closer. The tax credit is scheduled to be reduced again by another $1,875 July 1, however, and then be eliminated in 2020.
The Model 3's most direct competitor, the Chevrolet Bolt EV sells for $37,495 and is eligible for a $7,500 federal tax credit through June 30. After that, its tax credit will be phased down just like Tesla's.