Tesla’s recent decision to slash prices on its electric vehicles has caused shockwaves in the automotive industry. Thanks to the federal government’s US$7,500 subsidy for new EVs, the price of Tesla’s Model 3 has been reduced by up to 31%, making it more affordable than ever. Even without the subsidy, the Model 3 is now cheaper than the average new vehicle sold in the US, at a price point that is US$4,930 lower than the current average.
The price war that Tesla has started has had a significant impact on the overall new car market, not just the electric vehicle sector. The pandemic has caused new car prices to rise by US$10,000, which has made the affordability of Tesla’s electric vehicles all the more appealing to consumers. But it’s not just the Model 3 that has seen significant price reductions – the Model Y has also seen a drastic cut of US$13,000, which represents 21% of its tag price.
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The Model Y is now in a competitive position compared to the average new SUV in the US. In fact, it’s only slightly above the average price of a new car in the US, even before the federal subsidy is taken into account. This means that Tesla’s Model Y is now not only a formidable competitor to other electric SUV models, but to gas-powered SUVs as well.
Looking towards the future, Tesla is set to reveal its new Model 2 next week, with an expected starting price of US$25,000 before subsidies. This will likely widen the gap between Tesla’s prices and those of other automakers even further, and could revolutionize the automotive industry.
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The price reductions made by Tesla are a testament to the company’s ruthless efficiency in production, but also highlight just how expensive new cars have become in recent times. With Tesla leading the charge in making electric vehicles more accessible to consumers, it will be interesting to see how other automakers respond to the challenge.