Skip to main content

Tesla Cuts Model 3 & Y Prices As New Federal Tax Rebate Makes Customers Delay Their Purchases

Continouing with its price cuts, Tesla has once again lowered the price of the Model 3 & Y. The price cuts come as the recently proposed law to renstate the $7,000 EV tax incentive makes EV buyers hold off their purchases.

Join us...    

Tesla has once again lowered the starting price of the company’s entry-level vehicles - the Model 3 and Y. The current price cut is coming in a series of price adjustments that have made the two vehicles close to the average vehicle selling price in the US.

The base version of the Model 3 saw its price lowered by $1000 dollar. The luxury sedan now starts at $36,990. The base version of the Model Y also saw a cut but a slightly bigger one. The price of the crossover was cut by $2000 and currently starts at $39,990.

With the new price cuts, Tesla has made the two vehicles even better value for money than they already were. However, Elon Musk in the past has said Tesla vehicles are very good value for money however, no matter their value if people aren’t able to afford them, it still doesn’t make a difference.

Tesla Model Y

Related news: Boring Company Equipment Seen In Tesla Giga Texas As New Era Of Manufacturing Logistics Dawns

A way to understand Musk’s point is to look at the company’s Model S and X. Tesla’s two largest vehicles pack enough performance and tech to rival their competition which are 2 to 3 times more expensive (if not more). However, most people can’t afford a vehicle with a starting price of $80,000. As a result the Model S & X still don’t have mass-market adoption.

The new price cuts to the Model 3 & Y should make the vehicles addressable to even a wider swath of the population. However, it is peculiar Tesla decided to cut the price of the base Model Y by $2000 just months after its introduction.

The first quarter of the year has always been a tough time for Tesla. The company usually sees a decline in sales in this part of the year. In addition, talk of a new $7000 EV federal tax break has made some buyers hold off their purchases.

Related news: GM’s New SUV Has Better Range And Is $9,000 Cheaper Than The Tesla Model Y

When news broke out that the new Biden administration is looking to reinstate the federal EV tax break for further 400,000 vehicles, several people posted on Tesla focused subreddits saying they will hold off getting a new vehicle so they could take advantage of the tax break when it is passed into law.

Tesla Model 3

There is no way for sure to say, Tesla cut the prices due to decreased demand caused by the new tax incentive. However, Tesla executives on multiple occasions have admitted they adjust pricing based on demand.
Given the industry-leading margins Tesla vehicles enjoy it would make sense for the company to use pricing to drum up demand for its vehicles. Tesla has also been known to make continuous improvements to its production process to make it more efficient.

As a result, it would also be reasonable to assume the price cuts are a result of a new manufacturing efficency Tesla has been able to achieve in the manufacturing process. However, Tesla doesn’t always pass those savings to the consumers, especially if the company is already unable to meet demand.

Whatever the reason for the tax breaks, one thing that is really exciting is if the $7000 tax break passes in congress in addition to Tesla’s price cuts, it might be possible to buy a Model 3 for under $30,000. This would make the Model 3 a must-buy vehicle.

So what do you think? Are you excited about the price cuts? Did it make any of you decide to go ahead with a Model 3 or Y purchase? And do you think Tesla cut the prices due to lower demand caused by the talks of the federal tax break? Let me know your thoughts down in the comments below.

For more information check out: Tela Chooses Karnataka India For The Company’s 6th Gigafactory Also, see Rumor Says Tesla May Have Completed 1st Round of Indonesia Battery Talks Involving Panasonic

Tinsae Aregay has been following Tesla and The evolution of the EV space on a daily basis for several years. He covers everything about Tesla from the cars to Elon Musk, the energy business, and autonomy. Follow Tinsae on Twitter at @TinsaeAregay for daily Tesla news.

Join us...    


April (not verified)    March 17, 2021 - 1:30AM

I just got approved for a vehicle loan yesterday with the full intention on buying the Model Y. My 1st choice is the X but I will have to work my way up to the Big Boy. But this research DEFINITELY makes me want to wait if the tax credits won't be retroactive, which they should be if you purchase in 2021....My thoughts.

al (not verified)    March 29, 2021 - 7:19PM

Very interesting if they do really offer the 7k. Hopefully author keeps this article updated. I'm holding off for now.

Rob Jennings (not verified)    April 1, 2021 - 12:29AM

Is there a timeline on when that bill is coming through and would that be in addition to state incentives as NY State is currently offering 2k rebate

Veena Mandlay (not verified)    April 7, 2021 - 1:41PM

I just put the deposit for Tesla Model Y but holding to get delivery until $7000 federal credit. Currently, state of California is offering $2500 credit. Like to know as soon as federal credit is approved.

R. Sparman (not verified)    May 27, 2021 - 3:44PM

I really wanted to get the Model 3 (pre-approved loan and everything) but now I think I'll wait to see if/when the tax credit comes back.