Tesla Cuts Vehicle Prices For Fourth Time In A Year: Model Y, Model 3 Become Cheaper

Commenting on the price cut of vehicles, Tesla CEO Elon Musk said it is better to shift a large number of cars at lower margins and harvest that margin in the future.

Tesla dropped the starting prices for its two top-selling models overnight, the company's fourth price cut in the US this year. The company lopped USD 3,000, or about 6 percent, off the starting prices for all three versions of the Model Y small SUV, Tesla's top seller. It also cut USD 2,000, or about 5 percent, from the starting price of an understanding of the Model 3 small sedan.

Tesla could have cut the Model 3 prices to make more cars loaded with options eligible for the U.S. Government's USD 7,500 electric vehicle tax credit. With options, some Model 3s would exceed the government's USD 55,000 price limit for cars eligible for the credit.

But some industry analysts say demand may be slowing for the company's vehicles as more competition enters the market. Others say Tesla is using its high-profit margins to take market share from competitors. A message was left Wednesday morning seeking comment from Austin, Texas-based Tesla.

The cuts follow price drops overseas this week, with analysts reporting cuts in Europe, Israel, and Singapore. They come just ahead of Tesla's first-quarter earnings release scheduled for after the closing bell on Wednesday.

The USD 3,000 price cut on the Model Y dropped the lowest-priced Dual Motor model to USD 46,990. The Long Range model went to USD 49,990, and the Y Performance dropped to USD 53,990. All versions of the Model Y were already eligible for the U.S. Tax credit because the price limit for SUVs is USD 80,000.

The Model 3 Rear Wheel Drive, Tesla's lowest-priced vehicle, saw a cut to USD 39,990. The Model 3 Performance version stayed the same at USD 52,990. Neither of Tesla's slower-selling bigger models, the S and X, are eligible for tax credits, and prices remained the same Wednesday for both of them.

CEO Elon Musk has said that demand for the company's cars is limited by affordability. "There is plenty of demand for our products, but if the price is more money than people have, that demand is irrelevant," he wrote on Twitter earlier this month.

Fueled by previous price cuts, Tesla's first-quarter sales grew by 36%, but they still fell short of analyst expectations. The company said it delivered a quarterly record of 422,875 vehicles worldwide from January to March, up from just over 310,000 a year ago. According to FactSet, the increase fell short of analyst estimates of 432,000 for the quarter. Analysts are watching Tesla's financial results to see if the price drops cut into profit and margins per vehicle.