Tesla has reduced the price of its cheapest-ever electric car. The company announced on Tuesday that the Model 3, which first entered production in July 2017, is now available starting from $42,900 thanks to a $1,100 discount to all models.
The landmark is notable as CEO Elon Musk claims the car now starts from around $35,000 once buyers factor in tax credits and fuel savings versus a gas car. This is the starting price promised by the firm when the Model 3 entered production, although Tesla’s promise did not factor in these savings. The first cars focused on a $49,000 model with 310 miles of range and premium interior upgrades, eventually launching a $35,000 version with 220 miles of range and a standard interior. Tesla has yet to launch this 220-mile version, instead releasing a 260-mile “mid-range” version. Musk claimed in May 2018 that the cheapest version would launch six months after the company reached a 5,000-car-per-week production rate, a goal it reached in June.
Musk’s Twitter post drew questions from the community, with one user describing the Tesla website’s focus on post-savings prices as “cheap for a top-tier product.” While the car may work out cheaper than a gas-powered equivalent, it is not possible to buy the car for $35,000 in cash. Tesla’s calculations include tax credits that buyers will have to redeem during their next filing. The United States government has started phasing out the $7,500 electric car credit for Tesla, as the firm has sold over 200,000 such cars in the United States, meaning buyers will lose all of this benefit by the start of 2020.
While Tesla did not launch a new vehicle to reach its price point, a recent company change may have enabled the shift. Tesla cut its referral program this month, meaning users can no longer encourage friends to purchase a car and receive prizes. A Tesla spokesperson told Electrek that “primarily as a result of ending the referral program, which cost far more than we realized, Tesla is able to lower the price of Model 3 by $1,100.”
Buyers will have to act fast to make the most of the federal tax credit, as it’s set to drop in value from $3,750 to $1,875 on June 30.
No word yet on whether Tesla will introduce another price cut to compensate.