Massive Tesla US price cuts go well beyond small discounts in Australia

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Tesla has decided to make drastic pricing reductions for its vehicles across the globe, and in the United States by as much as 20 percent – well beyond the smaller discounts the EV maker applied to its Model 3 sedan and Model Y SUV in Australia last week.

According to an in-depth report by Reuters, Tesla has cut prices in a range of countries, including the USA, Germany and China. 

In one of the automakers biggest markets, the USA, Tesla has cut prices by up to 20 percent for several models, mainly for the Model 3 and Model Y. This follows more modest 4.7 percent discounting measures experienced in the Australian market recently.  

With federal tax credits having been rolled in from 1 January 2023 in the United States, the overall discount benefit for a Tesla could peak at nearly 30 percent, according to Reuters. The tax credit or rebate is worth USD$7500.  

However, not everyone is happy with the cuts, especially those individuals who purchased a brand-new Tesla in December 2022. 

In China, owners who missed out on lower prices have protested over the sudden price drop, calling for compensation. 

What’s behind Tesla’s sudden discounting?

Tesla’s Elon Musk said last year that prices had been “embarrassingly high”, with analysts saying that the company had been forced to compete with larger, more established car makers.

In Australia, Teslas have been some of the most affordable EVs on offer, though in the United States the Model Y in particular has been more expensive than the likes of the Hyundai Ioniq 5 and Volkswagen ID4. 

In the USA, the Ioniq 5 currently starts from USD$41,450 before on-road costs in standard range guise, while the ID4 starts from USD$38,995 before on-road costs.

After the major discounting, the Tesla Model Y (starting now from $52,990 for a long range) and Model 3 (starting from $43,990 in RWD guise) are both still more expensive, however Tesla has clearly closed the gap with its rivals. 

By reducing the price of its cars, Tesla is seeking a greater market share, however likely at the expense of total profit.

Relative newcomers to the industry such as electric car giant BYD have begun to challenge Tesla by selling some of the cheapest EVs on the market. 

In Australia, the $48,011 BYD Atto 3 currently undercuts the cheapest Tesla Model 3 ($63,900) by $15,889. 

MG Motors has also pushed to introduce much cheaper EVs into the Australian new car market. The Chinese automaker is currently offering its MG ZS EV at $46,709 driveaway.

Has Tesla cut prices in Australia?

Chasing Cars reported on January 10 that Tesla had cut prices down for its Model 3 and Model Y offerings. 

The Model 3 has seen price decreases of up to $3100, while the Model Y has had its pricing reduced by up to $3400. 

The Model 3 remains the cheapest Tesla available, however in Performance guise, the sedan will cost $89,900 before on-road costs. 

The larger Model Y, meanwhile, tops out at $94,900 before on-road costs in Performance specification.  

Tesla teetering on the edge of tax incentives in Australia 

With Tesla now setting the Model 3 standard range’s price at $63,900 before on-road costs, the model falls below the EV rebate cut off of $68,750 (for NSW and Victoria).

The Model Y now sits just above the rebate threshold and is priced at $68,900 before on-road costs. 

A real possibility is that further discounts will push more Tesla models into the eligible rebate space. In NSW, for example, electric vehicles purchased under the value of $68,750 will receive a rebate from the government to the amount of $3000.