Tesla cut the price of the Model 3 – this time $1,100 – for the second time in recent weeks. The first cut was $2,000.
Tesla Inc. is lowering the price on its entry-level Model 3 sedan by $1,100. It’s the second time the company has cut the price on the vehicle as it attempts to keep it affordable as federal tax incentives for the vehicles continue to fall.
The Palo Alto, California-based automaker previously lopped $2,000 off the price of the company’s best-selling vehicle to help offset the drop in the federal tax credit from $7,500 to $3,750 after the beginning of the year.
Tesla’s tax credit began phasing out for Tesla in January. The price cuts make the starting price of the Model 3, according to Reuters, $42,900, which still higher than the $35,000 the company touted it would be when the sedan was first introduced.
Chief Executive Officer Elon Musk tweeted that the company is “doing everything we can” to drop the Model 3 base price to $35,000, without credits. “It’s a super hard grind,” he tweeted.
(Tesla misses Q4 earnings, raising new concerns. Click Here for the story.)
Tesla's Elon Musk said the company is focused on squeezing costs out of the system to get the Model 3 price down to that $35K benchmark.
The company has been looking for ways to cut costs and then transfer those savings over to potential buyers in the form of price drops. The latest one is a result of ending the company’s referral program on Feb. 1.
The referral program gave new buyers six months of free charging and prizes for existing owners such as launching personal photos into deep space or invites to a Tesla event. The company spent $218 million to acquire Maxwell Technologies, an energy company that could help it both reduce battery costs and develop a battery alternative called an ultracapacitor.
Clearly the moves are designed to stimulate sales of the Model 3. The company is now selling them in China, but Tesla delivered fewer-than-expected Model 3 sedans in the fourth quarter. The company still wrestles with some production issues, but not nearly on the magnitude of what it faced in 2017 and early 2018.
(Click Here for more about Tesla’s $218M purchase of Maxwell Tech.)
Dozens of Tesla Model 3 sedans are reportedly being held in this Union Pacific freight depot in Salt Lake City.
The company is expecting a strong 2019, at least if Musk is to be believed. Musk presented an upbeat vision to reporters and analysts recently that anticipates a huge surge in both production and demand for the Model 3 sedan, while noting that two other products, the Model Y SUV and battery-powered Semi will go into production in 2020. The 47-year-old entrepreneur fended off concerns that Tesla won’t be able to cover an upcoming bond payment of more than $900 million without seeking new equity.
“2019 is going to be an amazing year for Tesla,” Musk said, later adding that he is “optimistic about being profitable in Q1. Not by a lot, but I’m optimistic about being profitable in Q1 and for all quarters going forward.”
That message may have fallen on deaf ears, however, the automaker’s stock tumbling sharply in after-hours trading. It probably didn’t help that the carmaker managed to eke out what Musk earlier in the month had described as a “tiny profit” of $1.93 a share, about 14% under the Wall Street consensus forecast, according to FactSet.
(To see more about Tesla’s new Gigafactory in Shanghai, Click Here.)
And the CEO has also warned that Tesla faces a “very difficult” road ahead as it moves into the first quarter.