Tesla Model 3 price drop makes entry-level auto more affordable

Tesla stunned the automotive world after its reservations list for the promised $US35,000 Model 3 ballooned to over half a million orders in 2017. The base-or standard, as Tesla calls it-Model 3 starts at $36,200, including $1,200 destination charge, and comes with an estimated range of 220 miles.

It was only last month that Musk said a $35,000 version that could be sold profitably was perhaps six months away.

"While the US$35,000 price is likely to boost demand, the company's plan to move to a primarily online only model was very surprising and we see it as a serious barrier for a large swath of potential customers as the company looks to enter the 'mass market"'.

As for Tesla's profitability, it's retreating from earlier predictions - with Musk acknowledging Thursday the company will remain in the red in the first quarter. The stock is still up from where it was two days earlier, when the CEO tweeted the company had news to share.

Tesla also announced that it is shifting sales worldwide to online only to "achieve these prices while remaining financially sustainable".

Tesla introduced the Model 3 in 2017 as a more affordable way for consumers to purchase its electric cars.

It was also in January that Tesla announced it would be Looking ahead at our mission of accelerating the advent of sustainable transport and energy, which is important for all life on Earth, we face an extremely hard challenge: making our cars, batteries and solar products cost-competitive with fossil fuels. Some jobs will be cut and some employees will transition to different parts of the company, he said. It also confirmed that to afford selling the new model at this price it would need to close most of its brick and mortar stores over the next few months.

"We will be closing some stores, some reduction in headcount as a result, there's no question about that". "There's no other way for us to achieve the savings required to produce this vehicle and still remain profitable".

"Quite literally, you could buy a Tesla, drive several hundred miles for a weekend road trip with friends and then return it for free", the company said, adding that it is confident people will like the auto enough to keep it. He said moving away from stores will be "incredibly helpful" toward boosting deliveries.

We'll be sharing more information on this transition soon.

The announcement comes at a crucial time for Tesla (NASDAQ:TSLA), as USA tax incentives for buying an electric vehicle are drying up.

The $35,000 version of the Model 3 was supposed to roll out around the time it was revealed in 2016, but in order for Tesla to maintain production, the company focused on higher-priced versions of the vehicle. As of July 1, Teslas will be eligible for only an $1,875 US incentive.

Later this year, Tesla will add features for recognizing and responding to traffic lights and stop signs, and automatic driving on city streets. "It is a hard decision but I think it's the right decision for the future", said Musk. "And then we would expect to make somewhere between 70,000 to 100,000 of the S and X. So the lower bound would be 350,000 plus 70,000, and the upper bound would be 500,000 plus 100,000". The agency alleges he breached that deal with a February 19 tweet, which he corrected hours later with the help of a company lawyer.

  • Eleanor Harrison