Tesla Prices - Right Where They Should Be
A Tesla Model 3 - base version at around $39,000 - is about $9,000 cheaper than the average vehicle price in the United States, which is around $48,000, according to Kelly Blue Book in 2023. Even without the U.S. tax credit, the Model 3 is much cheaper than the average car. With the tax credit, it's miles cheaper.
Now, don't get me wrong, a Tesla vehicle is still not "cheap" for the average American family. An unforeseen windshield repair this year cost me $1,400. That's going to be a big hit to most American families. However, the price is headed in the right direction.
I remember when I bought my first real vehicle, which was a Honda Fit, 2009, in the year 2009, and it cost me $17,000. I thought this was a decent price for a vehicle and to this day, the vehicle is used by my daughter to drive.
Buying my Tesla Model 3 RWD, was definitely a big stretch for me. It cost 3 times what it cost me to buy that Honda Fit. Of course, when you factor in inflation, it's not quite 3 times the cost, but it is still much more expensive.
The magic number for Tesla vehicles to get to is $20,000 to $25,000. That puts them at an affordable amount for the average American family and begins to make them affordable across the world.
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Tesla Vehicles Will Get Cheaper
Tesla can't succeed in their mission by working to keep gross automotive margins high and maximize profits from selling vehicles. That's not going to work because most people can't afford a Tesla when Tesla uses that strategy. Affordability starts to increase when Tesla lowers prices, and I think that Tesla will continue to lower prices in the future of all its vehicles.
There are two versions of Tesla vehicles that are coming that will help drive them to the affordability I experienced when I bought my first Honda Fit many years ago. These two versions are:
It's the sub-compact version of these vehicles that will put a Tesla vehicle in the $17,000 range. Battery technology will need to improve to give the Tesla a range that is comparable to what I got in my Honda Fit. I could get 300 miles of range pretty easily in that car and more if I drove conservatively.
When Tesla creates a sub-compact car at a $17,000 price point, that has an EPA range of 300 miles or more, to me, that is game over for every other automaker.
Look for Tesla to continue to lower prices. If interest rates go down, I would like to see Tesla not raise their prices too much to compensate for lower loan costs. Let the consumer benefit.
Tesla will make most of their money in the future from software on vehicles - FSD - and autonomous ride hailing, the energy business, and much further in the future, the Tesla Bot.
What do you think about Tesla's prices - should they continue to lower them?
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Jeremy Johnson is a Tesla investor and supporter. He first invested in Tesla in 2017 after years of following Elon Musk and admiring his work ethic and intelligence. Since then, he's become a Tesla bull, covering anything about Tesla he can find, while also dabbling in other electric vehicle companies. Jeremy covers Tesla developments at Torque News. You can follow him on Twitter or LinkedIn to stay in touch and follow his Tesla news coverage on Torque News. Image Credit, Tesla, Screenshot