Tesla Cuts Price of Model 3 for Second Time in 2019

Ending the customer referral program reportedly enabled Tesla to reduce the price of the Model 3.

byRob Stumpf|
Tesla Cuts Price of Model 3 for Second Time in 2019

In an unannounced move by the company, Tesla has slashed the price of its best-selling Model 3 electric sedan by $1,100. This move marks the second price reduction in 2019 so far, following a fleet-wide price drop of $2,000 which occurred at the beginning of the year.

As of writing, the most basic Model 3 can be had for $42,900, a nine percent reduction over the $46,000 price tag that the vehicle held on on Dec. 31, 2018.

Originally when the mid-range Model 3 launched in October of 2018, the vehicle was priced at $45,000. Five days after its launch, Tesla increased the cost to $46,000 and held steady until Jan. 1, 2019, when it reduced the price of all its models by $2,000, offsetting the newly reduced federal tax credit. This effectively dropped the mid-range Model 3's price to $44,000, until it was reduced yet again on Tuesday.

According to Bloomberg, the automaker reports that the slash was made possible by eliminating its vehicle purchase referral program last month. It's not clear how much of Tesla's margin was caused by the program itself, however, several individuals were able to refer enough buyers to the brand to qualify for a free $250,000 Tesla Roadster. Though the cost burden was apparently present across the entire lineup, CEO Elon Musk specifically noted that the referral program was adding too much to the bottom line of the Model 3 in particular.

Tesla says that it is still working towards chipping away the price in order to reach its long-promised goal of $35,000.

"We’re doing everything we can to get there." said Musk in a tweet to The Drive directly. "It’s a super hard grind."

Since the announcement of the Model 3, Tesla has touted that it aims to launch the car as an affordable EV. Ultimately, the automaker has eyed a price tag of $35,000, but did note that it would take time for the company to reach the position of being able to produce the car at a profit at that particular price point. The automaker believes that by continuing to reduce the cost of the car, it will be able to inversely increase the sales and satisfy a seemingly insatiable demand.

"[I]t's important to appreciate that the demand for Model 3 is insanely high. The inhibitor is affordability." said Musk during Tesla's fourth quarter earnings call. "It's just like people literally don't have the money to buy the car. It's got nothing to do with desire. They just don't have enough money in their bank account. If the car can be made more affordable, the demand is extraordinary."