Tesla Model 3 Gets Price Cut as Reduced Tax Credit Looms

Tesla dropped the price of the Model 3 sedan by $1000 on Thursday.The Long Range and Performance versions of the Model Y also received a $2000 price cut, with the base Model Y officially joining the lineup.The price reductions come as the $7500 tax credit for the base Model 3 will be halved on April 18.

If you’ve been on the fence about buying a Tesla Model 3, now’s the time to decide. In anticipation of a reduced federal tax credit starting later this month, the company reduced the price of the single-motor rear-drive sedan by $1000 on Thursday.

“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 automaker said on a Federal Tax Incentives section of its website.

The reduction comes because the lithium-iron-phosphate battery used in the base model 3 is the only battery from Tesla’s U.S. lineup that sources its cells from China. For a vehicle to qualify under the Inflation Reduction Act, it must be assembled in the U.S. even to be considered for qualification. On top of that, a percentage of its battery minerals must be sourced from a specific list of free-trade partners (not including China), and lastly, its battery cells must be assembled in North America.

That means that from now until April 18, the Model 3 has a starting price of $43,630 and qualifies for the full $7500 credit. After that, the credit will be cut in half. As to what Tesla will do with Model 3 pricing—your guess is as good as ours.

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In other Tesla pricing news, the Long Range and Performance versions of the Model Y also received a $2000 price cut on Thursday and now start at $54,630 and $58,630, respectively.

Additionally, a base version of the Model Y with 279 miles of range was added to the lineup on Tesla’s website. The base model comes with a small discount to the Long Range model, and starts at $51,630. It was previously limited to inventory models and wasn’t listed next to the Long Range and Performance Models on the website, with Tesla opting for more of an In-N-Out secret menu approach. Tesla notes on its website that all versions of the Model Y will remain eligible for the full credit beyond April 18.

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Associate News Editor

Jack Fitzgerald’s love for cars stems from his as yet unshakable addiction to Formula 1.
After a brief stint as a detailer for a local dealership group in college, he knew he needed a more permanent way to drive all the new cars he couldn’t afford and decided to pursue a career in auto writing. By hounding his college professors at the University of Wisconsin-Milwaukee, he was able to travel Wisconsin seeking out stories in the auto world before landing his dream job at Car and Driver. His new goal is to delay the inevitable demise of his 2010 Volkswagen Golf.