Tesla Inches Closer to $35,000 Model 3, Reduces Price for Sedan

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【Summary】Tesla is hoping to cancel out the effects of the loss of federal tax credits by slashing the Model 3’s price tag by an extra $1,100.

Original Vineeth Joel Patel    Feb 07, 2019 6:00 AM PT
Tesla Inches Closer to $35,000 Model 3, Reduces Price for Sedan

Consumers have been waiting for the $35,000 Tesla Model 3 for what seems like forever – or at least since Tesla officially started to deliver the model to buyers. The vehicle, though, has been something of a unicorn, as the automaker has used the more expensive Model 3 models to stay alive. In a confusing move, Tesla claims the latest price cuts finally give consumers the $35,000 Model 3 they've been waiting for, but that isn't exactly true. 

On February 6 th, Elon Musk, Tesla's CEO, took to Twitter to announce that the latest price cuts would finally bring the Model 3 down to $35,000. Unfortunately, the real answer is a little more complicated than that. Take a look at Tesla's configurator, and the price of the rear-wheel-drive Model 3 with the mid-range battery (the most affordable option) is indeed below $35,000 at $34,850. Dissect that number, and things are a lot different. 

The $34,850 price tag includes the full $3,750 federal tax incentive and a $4,300 gasoline savings. Tesla also keeps the $1,200 destination fee out of the picture. Including the federal tax incentive makes sense, as does excluding the destination fee. But advertising the gasoline savings as being something that every customer will benefit from is puzzling. 

The gasoline savings, according to Tesla's site, is what consumers can expect to save by switching from a gasoline vehicle to an all-electric Tesla. If you drive 10,000 miles a year and gas is $2.85 a gallon, the automaker expects you to save $4,300 over six years. Needless to say, those are awfully specific numbers and won't apply to everyone. 

Say you ignore the federal tax credit and the gasoline savings, and actually add the destination fee into the overall price, what does the Model 3 cost then? That answer is $44,100. That is clearly a far cry from the promised $35,000 before incentives that everyone's looking for. But it is another step to actually coming out with the fabled price tag. 

The decrease in price also practically makes up for the fact that the U.S. federal tax credit officially started to phase out at the beginning of this year. In January, the federal tax credit for buyers of a Tesla was cut in half to $3,750. To help offset the cost, Tesla reduced the price of the Model 3 in January by $2,000. With that cut, pricing for the Model 3 started at $45,200. The latest decrease is by $1,100, which means that Tesla has nearly erased the $3,750 loss from the change in the federal tax credit. 

Clearly, there are some interesting marketing tactics going on, but it's nice to see Tesla reducing the price of its most affordable model. And if you take Musk at his word, the $35,000 Model 3 is still in the works. But that model will be priced at $35,000 without including incentives. Hopefully, the figure doesn't include the gasoline savings either. 

"We're doing everything we can to get there. It's a super hard grind," said Musk in another tweet. 

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