According to a recent report, Tesla’s Model 3 and Model Y electric vehicles are now priced below the average sale price for cars in the US. The Model 3 (pictured above) and Model Y are Tesla’s most popular models.
Although Tesla’s recent price cuts could cost the company $1.2 billion per year, they allow Tesla electric vehicles to beat gas-powered competitors on price.
Electric cars have long had a reputation for being more expensive than gasoline cars. If Tesla can change this reputation, it’s likely to remain a profitable company in the long-term.
The starting price for the rear-wheel-drive Tesla Model 3 is $38,990 before taxes and additional fees. This means that the Model 3 now costs $8,700 less than the average car or truck in the US. The Model 3 is also priced $6,500 lower than the entry-level BMW 3 Series and $5,800 lower than the base Mercedes-Benz C-Class.
These price comparisons do not include the $7,500 federal tax credit and state incentives. When these incentives are factored in along with fuel savings, the Model 3 becomes as affordable as a Toyota Corolla.
According to InsideEVs, the average annual gas cost for a 2023 Toyota Corolla is $1,650, with a sales price of $21,900. This would cause the Corolla to cost $26,850 over a three-year time frame.
In comparison, the Model 3 gets a federal tax credit of $7,500 and saves $3,000 in gas costs over three years. There are also state-level incentives in many states, such as the $2,000 electric vehicle credit in New York. With these figures, a Model 3 in New York would cost about $26,490 over a three-year window.
It’s important to note that these estimates may vary based on the region. They also don’t include maintenance costs, sales tax, and other fees. Nonetheless, the claims of price parity between the Model 3 and gas-powered vehicles are accurate.
It’s not all positive news for Tesla, however. The price reductions and investments in Cybertruck production have lowered Tesla’s profit margins from 26 percent in Q2 2022 to 18.1 percent in Q2 2023.
Additionally, Tesla’s Q3 2023 global sales were about 6% less than in the preceding quarter. Tesla has blamed the decline on factory downtime.
As more affordable electric vehicles from competitors like Chevrolet and Volvo enter the market in the near future, Tesla’s pricing strategy will be closely watched.
Image Source: Berlinergy, https://shorturl.at/bEV19