Tesla Is Doubling Down On Model 3 Discounts, Creating Problems For EV Rivals

Tesla is doubling down on discounts for the Model 3. Positioning the Model 3 — with the tax credit* — as one of the least expensive EVs in the U.S. This comes on the heels of discounts last month.

Factoring in the federal tax credit, the price now drops close to $30,000 in some markets. And potentially lower if you include state rebates.

One theory is Tesla is trying to liquidate inventory ahead of a Model 3 refresh, as widely reported (Electrek). Rumors about the Model 3 refresh are sketchy but Musk alluded to a “new product” (image below) at the shareholder meeting in May.

An alternative theory is that Tesla is simply trying to move excess inventory or testing demand at lower prices.

Chevy’s claim to cheapest 250-mile+ EV fading

Tesla’s move on pricing is changing the dynamics of the EV market. With an EPA-rated range of 259 miles, the Chevy Bolt had been seen as the bargain EV but that’s an increasingly tenuous claim in the wake of General Motors announcement that it will discontinue the Bolt later this year.

And there are problems with availability. While the cheapest Bolt EV — with an MSRP of below $30,000 — is still a bargain, it is chronically unavailable on dealer lots in the U.S. And, in many cases, seeing stiff markups that jack up the price over $30,000. The Bolt EUV (a slightly larger version of the Bolt EV) is only sporadically available** and often priced well above $35,000.

The cheapest Model 3 also has longer range than the Bolt, with the 2023 Model 3’s EPA-rated range at 272 miles, boosting its competitiveness.

More competition ahead?

There’s more to come from Tesla, including new high-volume products. “I would say…we will probably make…in excess of five million units a year of these two models combined,” Musk said at the Shareholder meeting in May.

For reference, Tesla made just shy of 1.3 million Model 3/Y in 2022.

Musk has also talked about lower material and component costs, including a next-generation lower-cost drive unit (which uses a permanent magnet motor and no rare earth materials) and lower battery cell costs, among other things.

“I just want to emphasize that we are actually building a new product…we are actually designing a new product…we’re not sitting in our hands.” — Elon Musk, May 16, 2023

How low can Tesla go in the future? “Everyone wants lower transaction prices, but the current offerings throughout the industry have made it clear the masses aren’t willing to compromise on content, interior space and body style,” Ivan Drury, Edmunds’ director of insights, told me in an email.

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NOTES:

*You need to owe taxes at least equal to the federal tax credit to use the full credit. That said, states do offer rebates (on top of the federal tax credit) that are a straight discount.

**Checks in Los Angeles — one of the biggest markets for the Bolt — often show “inventory not available” for the Bolt.