Tesla price cuts threaten image as a tech firm

Those include a reliable version of Tesla’s Full Self-Driving software, which is currently classified as advanced driver assistance and not autonomous, despite its name and $15,000 price tag. On Tesla’s earnings call last month, Musk declined to say what percentage of Tesla buyers are opting for the FSD software.

Tesla is also behind on plans to release its Cybertruck pickup, designed to challenge Detroit automakers in the segment. Musk said last month that Tesla is building test vehicles at its year-old factory in Texas and may hold a launch event in the third quarter to deliver the first Cybertrucks to customers.

More recently, Tesla has focused on future growth from a new platform for lower-priced vehicles, with a planned factory in Mexico that will make them using new manufacturing techniques to slash costs. Without a lower-priced vehicle, Tesla has leaned on price cuts — and EV incentives — to push the Model 3 and Model Y into the mainstream.

That’s good for consumers, since Teslas have been priced like luxury vehicles for the past two years because of past price increases that Musk blamed on rising costs from supply-chain issues.

Tesla prices today are much closer to mainstream gasoline-engine vehicles, especially with federal tax incentives of $3,750 for the base Model 3 and $7,500 for all versions of the Model Y.

“The fact that a Model 3 now starts just a hair below $40,000 before any kind of federal tax credit kicks in, is a good preview of what’s to hopefully come: actual, affordable EVs. People clearly want Teslas but are often priced out of them,” DeGraff said.

According to AutoPacific data, most shoppers considering a Tesla in the next three years are looking for a mainstream brand and not luxury. The median price they plan to pay for their next vehicle is $40,000. Toyota is the top runner-up brand for buyers interested in a Tesla.

Tesla recently introduced a less expensive version of its Model Y, in addition to slashing prices for the more expensive ones by up to 30 percent. The new Model Y standard range starts at $48,630 with shipping, which is less than the average transaction price for a new vehicle in the U.S. as of late April.