On Wednesday, Tesla Inc announced it has cut the price of the Model 3 for the second time this year. The decision comes after the electric vehicle manufacturer lost a tax credit that made its cars more affordable for U.S. consumers.
The company is ramping up production of the Model 3 to reach a more accessible price for conventional vehicle buyers. Tesla has also cut expenses in an attempt to turn in profits this year.
Tesla is facing the loss of the tax credit
The tax credit that the U.S. granted Tesla has been phasing out since January, which raised the vehicles’ price by $3,750.
The company stated it reduced the price of its Model 3 by $1,100, after lowering it by $2,000 in January.
This shift leaves the starting price of a Model 3 at $42,900. However, it is still quite above the $35,000 target price that CEO Elon Musk had originally promised.
Musk told a Twitter user that the company is “doing everything we can” to reduce the base price of the Model 3 to $35,000 without the credits. “It is a super hard grind,” he said.
The billionaire has been promoting cost-cutting initiatives over the past months, including cutting jobs. He also decided to end a customer referral program. Tesla clarified in a statement that cutting this expensive program enabled it to lower the price of the Model 3.
The price of the Model 3 to further decline
This price, however, will continue to decrease as production of this model increases and manufacturing costs go down. The target price for Tesla is $35,000 without incentives. With the current incentives, the price of the vehicle would be $26,500.
Tesla delivered less Model 3 units than it originally expected for the fourth quarter of 2018, and was forced to cut the price to compensate for the loss of the green tariff. In spite of this, production keeps growing as the production capacity continues to increase.
With regards to the cost of the Model 3 in Europe, Elon Musk has said there is not much more than they can do. He explained that the vehicles have a 21 percent value-added tax, plus the 10 percent tariff for U.S. vehicles.
Moreover, thus far the company has only brought its more affordable models. As production continues to rise, the selling price in Europe will gradually go down.
Leader in popularity
Consumer Reports, a publication from the U.S. consumer association, published the results of its latest poll to more than half a million users. The survey seeks to assess the level of satisfaction with their vehicles and get to know which ones are better rated.
For this poll, the publication divided the questions into six categories: driving experience, comfort, value, design, noise, and AC system. The purpose is to get to know which models have met costumer’s expectations. The Model 3 was at the top of this list.
As a result, the Model 3 now stands above some big names. It beat none other than the Porsche 911, the Genesis G90, the Chevrolet Corvette; the Toyota Avalon, the Kia Stinger, the Chevrolet Bolt, the Toyota Prius, and the Dodge Challenger. It even beat another Tesla model, the Model S.
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