Is an EV price war here yet?

Tesla late Thursday introduced yet another price cut for its Model 3 and Model Y, as represented on its consumer website, bringing the price of these new EVs down to their lowest ever. 

The move, cutting up to $2,250 off these models, depending on the version, directly follows news earlier this week that, globally, third-quarter Tesla deliveries came up short of what had been expected. Viewed as a single quarter, they might not be on track for the company’s 1.8-million-vehicle guidance for 2023.

Tesla also recently introduced a base rear-wheel-drive version of the Model Y—so altogether, the entry cost of the Model Y is much lower than a couple weeks ago. It now starts at $45,380, including destination. If you can claim the $7,500 EV tax credit its effective price is just $37,880. And prior to the credit, the Long Range now slots below $50,000.

Tesla Supercharger

Meanwhile, the Model 3 Standard Range is the price leader of the lineup and costs $40,380 according to current pricing. If you can claim the $7,500 EV tax credit, that’s just $32,880—and some state incentives will effectively cut that further. 

The price cut is the latest in a series of many—and a trend that essentially started late last year. The most noteworthy of these was a January 2023 move that cut Tesla prices up to 20%. The automaker has also in 2023 reintroduced Standard Range versions of Model S and Model X, and cut the price of those premium models by tens of thousands this year. Another recent price cut for the Model X makes it eligible for the revamped EV tax credit and its $80,000 cutoff for SUVs.

The U.S. hasn’t yet seen the release of an updated Tesla Model 3, termed Highland, that is currently being rolled out to Europe, China, and some other markets. While some of Tesla’s lagging global delivery may be due to that ramp, lower U.S. prices are a likely indication that it’s not the only reason. 

Tesla Model 3 (Europe-market refresh)

Going by last year’s delivery totals, U.S. sales made up more than 40% of Tesla’s global sales. In 2022, it sold about 536,000 vehicles in the U.S., while it delivered 1.31 million vehicles globally. 

Considering that and other price cuts in the first few months of the year, as of April the Model 3 and Model Y were both cheaper than the average new vehicle, EV or not. 

Have Tesla’s continued price cuts signaled a price war for EVs? So far, the closest comparison is Ford cutting nearly $10,000 off the F-150 Lightning price. Other automakers haven’t yet engaged and have opted to offer a series of incentives rather than lowering the sticker price. But once even one company other than Tesla lowers it significantly like this, things could get very interesting.