The company confirmed Tuesday increased the price of the cheapest model 3 by $ 400 to $ 35,400. It only began to take orders for the cheapest version of the car at the end of February.
The company had long promised that it would bring all the electric cars to the masses with a $ 35,000 version of the model 3. But for most of the first two years of Model 3 production, it just built more expensive models when it tried to increase cash flow and return to back-profitable quarters for the first time in its history.
The company could use any cash it can get. Earlier this month, Tesla sold $ 2.3 billion of debt and stock to raise money. Although a $ 400 price increase doesn't seem to make much of a difference, it's a sign that the company is watching the economy. That $ 400 per model 3 would turn into $ 20 million in additional quarterly revenue if sales were still in the first quarter sales rate.
"At this point, unfortunately, every dollar counts," said Karl Brauer, publisher at the Cox Automotive Industry.
The price of $ 35,000 is close to the average price of any US car purchase. And it was important benchmark for Tesla's promise to bring electric cars to the masses. But as a startup automaker, Tesla had trouble meeting that price. Other, established car manufacturers like General Motors could afford to lose money on their all-electric Chevrolet Bolt and pay for any losses from their huge sale of gasoline-powered truck and SUV. Tesla couldn't.
Fortunately for Tesla, the demand for the more expensive versions of Model 3 was strong, so it could become the best-selling US luxury car of any kind ̵[ads1]1; gas or electric. But the promise of a $ 35,000 model 3 proved to be elusive.
"I guess that Elon Musk saw a point in the years ago where he could sell a $ 35,000 car and make money from it, "said Brauer shortly after the cheapest version of model 3 was sold. "So he commits to that number. Now they can technically say they've done that, but they realize it's not a good business model. They lose enough money on every $ 35,000."
So Tesla soon supported himself from the lowest priced model. A month ago, online sales turned down the $ 35,000 version of the car. By requiring buyers to place phone orders or go into a store to buy it, buyers had to interact with a seller who could try to sell them a slightly more expensive version of the car. Many buyers may not even realize that the $ 35,000 version was an opportunity.
The cheapest version that a buyer can order online comes with a slightly longer battery type and some other options not available in the $ 35,000 version. It was priced at $ 39,500. [19659012] And now, Tesla has increased the price of all model 3 versions, albeit with a modest $ 400, or just over 1% for the cheapest versions.
"Like other car companies, we regularly adjust prices and available options" Tesla said in a statement.
