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Tesla’s Model 3 pricing inches closer to $35,000 target

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A $1,100 price cut is a start

Photo by James Bareham / The Verge

Tesla has reduced the price of the Model 3 by $1,100, bringing the starting price of its cheapest model down to $42,900 before incentives. All three versions of the car saw the same price reduction, including rear-wheel drive, all-wheel drive, and performance models.

In a statement posted by Electrek a Tesla spokesperson said that the reduction was primarily due to the ending of the company’s referral program on February 1st, which the company said cost far more than realized. The program was originally intended to boost demand by promoting word-of-mouth marketing, but the long waiting lists for its vehicles suggest this is no longer necessary.

The cheapest Tesla now costs $39,150 after taking advantage of the federal tax credit, which is due to be cut in half in July, effectively adding $1,875 to the cost of Tesla’s cars. An unsubsidized $35,000 starting price is the goal for the Model 3. It’s a target price that represents both affordability and mass-market scale. However, in a follow-up tweet, Tesla CEO Elon Musk said that “it’s a super hard grind” to reach this price.

Musk, has been outspoken about the need to increase the production rate and make manufacturing design improvements in order to reduce the price of its cars on the way to the elusive $35,000 target. In a letter sent back in January announcing layoffs, Musk said that the company needed to achieve greater economies of scale if it wanted to produce the $35,000 version of the Model 3, “and still be a viable company.”

Meanwhile, in Europe where the first Model 3 shipments have just started to arrive, the Model 3’s cheapest model is the all-wheel drive dual motor version, which has a starting price of at least €53,500 (equivalent to around $60,000). Musk attributes the higher cost to VAT and import duties.

Correction: An earlier version of this article noted that after applying the federal tax credit, the lowest price for the Model 3 is now $34,850, based on the advertised “After savings” price on Tesla’s website. This is not true. Tesla’s calculation estimates further “savings” based on the car’s lack of gasoline usage totaling $4,300. We have updated the article to reflect this. The Verge regrets this error.