Tesla, the leading electric vehicle maker, has recently reduced the price of its Model Y crossover in the US market, but only by a small margin. The price cut comes after the company introduced a new variant of the Model Y, the rear-wheel drive (RWD) version, which is the cheapest option available for the popular EV.
Model Y RWD Starts at $44,000
The Model Y RWD was added to Tesla’s online configurator on October 2, 2023, with a starting price of $44,000 before any incentives or potential savings. This makes it the most affordable Model Y ever, as it is $8,000 cheaper than the previous base model, the long-range (LR) all-wheel drive (AWD) version. The RWD variant also qualifies for the $7,500 federal tax credit, which brings the effective price down to $36,500 for eligible buyers.
The Model Y RWD has an estimated range of 300 miles on a single charge, which is slightly lower than the LR AWD’s 326 miles. However, it has a faster acceleration of 5.3 seconds from 0 to 60 mph, compared to 5.5 seconds for the LR AWD. The top speed of the RWD is 135 mph, while the LR AWD can reach 145 mph.
Other Model Y Versions Also Get Price Cuts
In addition to introducing the new variant in the configurator, Tesla also cut prices on the Model Y LR AWD and Performance versions by $2,000 each, with the former now starting at $54,630 and the latter at $58,630 (both including $1,390 shipping). The Performance version also comes with a $1,000 performance upgrade package, which adds 21-inch wheels, performance brakes, lowered suspension, and a carbon fiber spoiler.
The price cuts on the Model Y follow a similar trend that Tesla applied to its other models earlier this year. The company slashed prices on the Model 3, Model S, and Model X by up to $5,000 in January 2023, in an attempt to boost demand and maintain its market share amid increasing competition from other automakers.
Tesla Faces Production Constraints and Margin Worries
Despite the price reductions, Tesla still faces some challenges in meeting its delivery and profitability goals for the year. The company reported that it delivered 435,059 vehicles in the third quarter of 2023, which was below analysts’ expectations of 461,000. Tesla blamed the lower-than-expected deliveries on planned downtime to upgrade its factories, as well as supply chain issues and chip shortages that affected the global auto industry.
Tesla also faced some margin pressures as a result of the price cuts, which could erode its profitability and cash flow. The company’s gross margin in the second quarter of 2023 was 28.4%, which was higher than the industry average of 18.9%. However, some analysts have expressed concerns that the margin could decline in the third quarter due to the lower prices and higher costs.
Tesla’s stock price has also been volatile in recent weeks, as investors reacted to the news of the price cuts, the launch of the Model Y RWD, and the labor strike that affected some of its competitors. Tesla’s shares fell 2.5% on October 2, 2023, after the company announced its third-quarter deliveries, but rebounded 3.6% on October 3, 2023, after the Model Y RWD went live on its website.