Tesla Drops Its Prices By $2,000 To Make Up For EV Tax Credit Phase-Out

Feds halve EV tax credit to $3,750 as Tesla crosses 200,000 unit threshold

The Model 3 now starts of at $44,000

Tesla Announces Party and Camper Mode for Model 3, Model S and Model X
The new Model 3 has drastically increased the EV automaker’s sales.

Tesla confirmed the price change in a statement. Starting today [January 1, 2019], we are reducing the price of Model S, Model X and Model 3 vehicles in the U.S. by $2,000. Customers can apply to receive the $3,750 federal tax credit for new deliveries starting on January 1, 2019, and may also be eligible for several state and local electric vehicle and utility incentives…”

As of January 1, Tesla buyers will no longer be eligible to receive the full $7,500 EV tax credit on their new cars. As the Model 3 tipped the company over a 200,000 units, the tax credit is now just $3,750. To compensate, Tesla dropped its prices across the board by $2,000 to absorb some of the difference, according to a report by Electrek.

Tesla's first quarter 2018 sales weaker than expected
Tesla Model X prices also fell by $2,000 as a result of the company’s recent discount.

Other models are also less expensive

To that end, a rear-wheel drive Model 3 with the mid-range battery starts of at $44,000, down from $46,000. A Model S 75D starts off at $76,000. The most expensive Model X 75D now runs from $82,000 and up.

It’s also worth noting that the $2,000 discount comes right off the top of the car’s price. Some customers may prefer that to taking a $3,750 credit when they file their taxes later on. Tesla is making the move in order to keep demand up, as incentives continue to prop up electric sales. However, despite the encouraging price drop for customers, Tesla shares dropped nearly 8 percent Wednesday morning, opening at $303.85. While Tesla delivered 90,700 vehicles in Q4 2018, that was short of Wall Street estimates, according to multiple reports. It has improved slightly throughout the morning, to around $308.

The Model S also sees a $2,000 discount.

2018 was a year of trials and tribulation for Tesla, as it rolled out the Model 3 in greater numbers. There were production issues and delivery issues, but the automaker still managed to shift nearly 25,000 cars each month by the end of 2018. The tax credit played a role in that, but Tesla may be able to keep its momentum going as the tax credit phases out by improving its margins and driving higher sales. It’s worth keeping an eye on whether Tesla will manage to keep profits up through margins without needing the federal tax incentive.

Stay tuned to TFLcar.com for more updates!