Tesla cuts prices for Model 3, Model Y just before earnings in the first quarter

Image credit: Tesla

Tesla has cut the price of its Model 3 and Model Y electric cars for the second time this month. Now, Tesla’s most popular models will start under $40,000 before incentives.

The price drop comes on the eve of Tesla’s first-quarter earnings report, when investors will be watching the automaker’s margins after a series of price cuts this quarter.

This year alone, Tesla has issued rebates for the Model 3 and Model Y in the US in January and February, and for the Model S and Model X in March in an effort to lure buyers as competition increases and the economy weakens.

Over the past two quarters, the automaker has also cut prices for its electric cars in Mexico, Europe and China, sparking a price war among competitors.

The discounts actually boosted Tesla’s quarterly sales, with the automaker delivering a record 422,875 electric vehicles in the first quarter. But analysts say the increase in sales could come at the expense of healthy margins, which are expected to hit a more than three-year low as a result. According to Visible Alpha, Tesla is expected to report an auto gross margin of 23.2%, down from 32.9% last year.

Prices in the US for Model Y AWD, Long Range and Performance vehicles have been cut by $3,000 each. Model Y AWD went from $49,990 to $46,990; long range from $52,990 to $49,990; and performance from $56,990 to $53,990.

The cost of the Model 3 Standard Range RWD went from $41,990 to $39,990, marking the first time Tesla offered a vehicle for less than $40,000.

The Model 3 is the only Tesla model to have its federal tax credit reduced from $7,500 to $3,750 on Tuesday following the US Treasury Department’s updated guidance on battery purchases for the EV tax credit.

The price of the Model 3 Performance does not appear to have changed yet.