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Tesla’s Price-Cutting Streak Continues, New Base Model Y Added

tesla model y 2021 02 blue exterior front angle sedan scaled jpg 2021 Tesla Model Y | Cars.com photo by Christian Lantry

In an effort to balance affordability, tax credit eligibility and demand, Tesla is once again adjusting prices on its entire range of electric vehicles. After similar moves in late 2022 and early 2023, the automaker has cut prices yet again and has also introduced a more affordable base version for its bestselling Model Y SUV. The pricing tweaks come as Tesla reported increased deliveries in the first three months of 2023 but failed to meet its sales targets, according to Automotive News. The move also precedes a change to the federal EV tax credit rules that will soon cut the Model 3’s maximum tax credit eligibility in half.

Related: Tesla Slashes Prices as Much as 20% Across Lineup

Prices Fall Yet Again

After the latest round of price cuts, the Model 3’s base and Performance variants’ starting prices each dropped by $1,000, Automotive News reports. Meanwhile, the Model Y’s Long Range and Performance trims are each down $2,000; and starting prices for the Model S and X fall $5,000 and $10,000, respectively. The newly introduced base Model Y starts at $51,380 — $3,250 less than the Long Range variant. Below are the starting prices (including $1,390 destination fee) for all Tesla models as observed on April 10.

  • Model 3 Base: $43,380
  • Model 3 Performance: $54,380
  • Model Y Base (new): $51,380
  • Model Y Long Range: $54,630
  • Model Y Performance: $58,380
  • Model S Dual Motor: $86,380
  • Model S Plaid: $106,380
  • Model X Dual Motor: $96,380
  • Model X Plaid: $106,380

What’s the New Base Model Y?

tesla model y 2022 02 dynamic exterior front angle sedan white scaled jpg 2022 Tesla Model Y | Cars.com photo by Christian Lantry

In addition to the lower prices seen across all existing models, the new base Model Y brings a starting price that’s thousands of dollars lower than the SUV’s previous entry point. Like the Long Range, the base model comes with dual-motor all-wheel drive and gets a top speed of 135 mph, but the trade-off comes with the SUV’s maximum range. The base Y gets an EPA-estimated 279-mile maximum range compared to the Long Range’s 330-mile maximum. The automaker estimates a 0-60 mph time of 5 seconds, which is only slightly longer than the Long Range’s 4.8-second sprint. Lastly, the base model is offered with two rows that seat five occupants, while the Long Range offers an optional third row to seat up to seven.

According to Tesla, all Model Y variants, including the new Base model, are eligible for the full $7,500 tax credit. This is based on the $80,000 price cap for SUVs and the updated rules for battery sourcing and manufacturing.

Base Model Y Cost vs. Rivals

The new base Model Y makes the SUV more competitive against rivals like the Ford Mustang Mach-E, which saw its own set of price cuts in January. The 2023 Mach-E’s base Select trim starts at $47,495 for rear-wheel drive and $50,495 for AWD. The Volkswagen ID.4 has a lower base price of $40,290, but its AWD variant’s starting price comes in closer to the Model Y’s at $49,090. The Audi Q4 E-Tron, meanwhile, starts at $50,995 with RWD and $56,395 with AWD.

Tax Credit Shrinks for Model 3

tesla model 3 angle blue dynamic exterior front oem 1 jpg Tesla Model 3 | Manufacturer image

Unlike Model Y shoppers who can benefit from a more affordable base model and take advantage of the SUV’s full $7,500 tax credit, those interested in the base Model 3 will find that the maximum tax credit for the RWD sedan will soon be slashed in half. The automaker’s website states:

“On January 1, 2023, the Inflation Reduction Act of 2022 qualified certain electric vehicles (EVs) for a tax credit of up to $7,500. Based on new IRS guidance, the $7,500 credit will be reduced for Model 3 Rear-Wheel Drive on April 18 to $3,750.”

The RWD Model 3 only qualifies for a partial credit because its battery pack uses cells from China, and the new guidelines specify that all battery components must be sourced from the U.S. or a free-trade partner. It’s worth noting that the reduced credit applies to any base Model 3 put in service on or after April 18, regardless of its purchase date. The AWD Model 3 Performance is eligible for the full $7,500 credit, while the Model S and Model X do not qualify for any tax credits due to their higher starting prices.

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Former News Editor Jane Ulitskaya joined the Cars.com team in 2021, and her areas of focus included researching and reporting on vehicle pricing, inventory and auto finance trends. Email Jane Ulitskaya

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