Tesla reduces prices in the US as tax credit starts to phase out, Model 3 now starts at $44,000

With the start of the new year, Tesla buyers in the US now don’t have access to the full $7,500 federal tax credit for electric vehicles, but the automaker appears to have compensated by reducing the price of all its models in the US.

Tesla updated its online design studio to adjust the prices.

The Model 3 with Mid-Range battery pack used to start at $46,000, but the price has now been adjusted to $44,000.

The automaker had recently increased the price of both the Model S and Model X, but now those vehicles are also affected by the price drop.

Here are the updated prices:

• Model S 75D now starts at $76,000 (down from $78,000)
• Model X 75D now starts at $82,000 (down from $84,000)
• Model S 100D now starts at $94,000 (down from $96,000)
• Model X 100D now starts at $97,000 (down from $99,000)

We contacted Tesla about the price change and we will update if we get an answer.

Update: Tesla confirmed the price change in a statement:

“Moving beyond the success of Q4, we are taking steps to partially absorb the reduction of the federal EV tax credit (which, as of January 1^st, dropped from $7,500 to $3,750). Starting today, we are reducing the price of Model S, Model X and Model 3 vehicles in the U.S. by $2,000. Customers can apply to receive the $3,750 federal tax credit for new deliveries starting on January 1, 2019, and may also be eligible for several state and local electric vehicle and utility incentives, which range up to $4,000. Combined with the reduced costs of maintenance and of charging a Tesla versus paying for gas at the pump – which can result in up to $100 per month or more in savings – this means our vehicles are even more affordable than similarly priced gasoline vehicles.”

Tesla confirmed the price change in the release for its Q4 production and delivery numbers.

Electrek’s Take

The price change doesn’t compensate entirely for the $3,750 reduction in the federal tax credit, but many people would be happier with a $2,000 discount right now over a $3,750 credit on their taxes coming next year.

The market doesn’t seem to like it though and it’s understandable.

The price change shows that Tesla needs to reduce the price of its vehicles in order to keep some demand in the US following the start of the tax credit phase-out.

It was to be expected, but it, unfortunately, highlights just how much the demand for EVs is still linked to incentives.

Though it would be interesting to see how it affects Tesla’s gross margins. If they are still profitable with those price reductions that compensate for the reduction in the tax credit, it shows that things are going in the right reduction.

By the time the tax credit goes away completely, Tesla might be able to compensate for it entirely with margin improvements.

The story is still developing. Refresh for more…