Tesla has reduced the price of its Model 3 electric car for the second time in 2019. The latest cut takes $1,100 off the starting price of the sedan, and was applied across all trim levels and variants. That brings the price of the Model 3 down to $42,900 before government incentives.
The price cut was made possible by the elimination of Tesla’s customer referral program, according to Bloomberg. The program, which ended February 1, awarded prizes to Tesla owners who referred new customers to the brand. Some Tesla owners made enough referrals to earn free Roadster sports cars estimated to cost around $250,000 each. Tesla reportedly found the program to be costlier than expected.
Tesla previously reduced the price of the Model 3 (as well as the Model S and Model X) by $2,000 to compensate for the halving of the federal tax credit (from $7,500 to $3,750) available for the automaker’s cars. Because Tesla reached 200,000 sales last year, the federal tax credit is now being phased out. Tesla subsequently cut the prices of the Model S and Model X by an additional $1,000, and rejiggered the lineup of trim levels for both vehicles.
The cheapest Model 3 now costs $34,850 after the federal tax credit, although the price will effectively increase by $1,875 in July when the tax credit is cut in half again, before disappearing altogether at the end of the year. Tesla electric cars may still qualify for some state and local incentives after that, however.
An unsubsidized $35,000 base price has been the goal for the Model 3 all along, but Tesla isn’t there yet. The automaker is only building midrange and high-end versions of the Model 3 right now, as CEO Elon Musk believes production costs are still too high for the cheaper version to be financially viable. In January, Musk announced that Tesla would eliminate roughly seven percent of its workforce in an effort to control costs.
Tesla also recently announced that it turned a profit in the fourth quarter of 2018, and is reportedly moving ahead with plans for a fourth model, a crossover called the Model Y. But as Tesla continues working to build more Model 3s at an affordable price, it faces increased competition from other automakers introducing more new electric cars.
