Tesla Slashes Electric Car Prices

Photo of Tesla Model Y which is getting a price drop to try and increase demand and sell more EVs

The drop in Model 3 sedans, and Model Y SUVs, means that some Model 3 sedans, as well as certain Model Y SUVs, are now below the threshold to be eligible for electric vehicle tax credits. This is due to changes made by the federal Inflation Reduction Act which was passed into law last year. Tesla stated on its website that certain customers are now eligible to receive the tax credit for cars purchased through March.

Tesla didn’t know how long lower prices would stay in place. The Model 3’s lowest price dropped to $43,990, from $46,990. This is a 6.4% decrease. The market’s most expensive vehicles dropped by as much as $21,000 including the Model S Plaid which saw a 15% price drop.

Tesla’s five-seat Model Y, which Tesla considers an SUV, was previously not eligible under federal rebate guidelines. It had a list price of $65,990. The vehicle was not able to reach the minimum weight to be considered an SUV according to government standards. It also cost too much as of last week to qualify for a smaller vehicle. Musk had already taken to Twitter to declare that it was “Messed Up!” This was earlier in the month. Now, the price is $52,990

The legislation allows consumers to qualify for a $7,500 tax credit on new EVs or plug-in hybrids. However, the vehicle must meet some criteria. It must be less than 14,000 lbs, assembled in North America, and have a minimum of 7kw capacity. Pickups, vans, and SUVs are classified by their weight. Smaller vehicles, such as sedans, have to have a suggested retail value of less than $55,000.

These price reductions follow lower-than-expected delivery numbers for 2022. Although the company will soon release its quarterly earnings report, it already announced that it sold a record number of vehicles last year. However, these sales numbers were not enough to meet Musk’s goal of increasing sales by 50% each year.

Tesla had to deal with COVID-19 China shutdowns last year, which cut into its Shanghai factory production. However, it also continued scaling up production at its Berlin-Austin facilities. Investors are also concerned that Musk’s $44 billion purchase by social media platform Twitter has distracted them from Tesla’s operations.

Tesla shares fell more than 65% in 2022, surpassing the wider market declines. This means that Musk, whose wealth is largely held in Tesla stock, is now not the richest person in the world.

Giga Texas, a $1.1 billion manufacturing plant in Central Texas that Tesla opened in April, is seeing an increase in production. In April, the Austin facility began delivering Model Y cars and is now preparing for the highly anticipated Cybertruck. The company reported that it had reached 3,000 vehicles per week in December.