Model 3 price nears its launch tag as Tesla counters tax credit loss with another cut war round

Just when other EV makers thought they are getting some breathing space in the price war that Tesla started, the world's largest electric car company slashed its prices yet again, for a sixth time in the span of a few months. It is not the big, up to 30% cut that happened in January, but it made a Tesla vehicle cross the symbolic US$40,000 price barrier southwards.

The basic single-motor Tesla Model 3 with rear drive now starts from US$39,990, down two grand, a day after it became ineligible for the full $7,500 federal subsidy on account of its CATL batteries. Tesla also changed the wording of its price savings section to reflect that the Model 3 now qualifies for "up to $7,500 tax credit."

That's "$3,750 for Rear-Wheel Drive and $7,500 for Performance," while just the other day all Tesla vehicles qualified for the full amount before the Treasury's guidelines for the tax credit implementation were enforced on April 17. The Model Y price cut is even more significant, with both the LR and Performance Model Y versions now $3,000 cheaper.

As of April 18, there are only 6 electric vehicles in America which will get the $7,500 subsidy:

• Ford F-150 Lightning pickup
• Cadillac Lyriq
• Tesla Model 3 Performance
• Tesla Model Y
• Chevrolet Bolt
• Chevrolet Bolt EUV
• Chevrolet Blazer
• Chevrolet Equinox
• Chevrolet Silverado pickup

The last three haven't even started their sales yet, so the subsidy market is all for Tesla, Chevy Bolt, and the F-150 Lightning now.

With the tax credit, the RWD Model 3 now costs US$36,240 in white, very close to the original $35,000 starting price at launch way back in 2019 when the standard Model 3 only had 220 miles of range. Tesla is preparing to release a "Project Highland" mid-cycle upgrade to the Model 3 which would trim production costs further.

This may lead to another round of price cuts, leaving every other EV maker scrambling to adapt. Still, Tesla's stock may take a beating if the price war has significantly affected its margins when it reports Q1 2023 earnings today at 5:30 PM Eastern.

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