It is no secret that Tesla’s prices fluctuate more than the temperatures in springtime, so it comes to no surprise that it has happened yet again. Earlier today Electrek reported that Tesla has increased the price on all Model 3s by $400, including its off-menu versions. The newest Tesla Model 3 price increase means that the $35,000 Model 3 managed to survive less than three months.
The $35,000 Tesla Model 3
Tesla CEO Elon Musk has been promising that we would see a $35,000 Model 3 for several years now, and it was with no small amount of excitement that we finally got to see this idea come to fruition in February. Known as the Standard trim version, initial deliveries were continuously delayed as Tesla attempted to upsell buyers to the more expensive Model 3 Standard Plus. The Standard version only remained available via online ordering for under two months; afterwards, customers who really wanted to order it could only do so via phone or at one of the company’s stores.
The official statement on the change is that the Standard Plus was just more popular than the Standard Model 3. Tesla decided that it would simplify production, reduce cost and complexity, and streamline operations to drop one in favor of the other. By their accounts, the Standard Plus sold at more than six times the rate of the humbler Standard.
Tesla Model 3 Price Increase Necessary For Additional Funds
So what is the real reason behind the price jump this time? More than likely, $35,000 for the Tesla Model 3 Standard was just not feasible, and the company was losing money on each car delivered at that price.
The $35,000 price point was important because it is close to the U.S. average sales price for new car purchases, so being able to bring an electric car to ordinary people at an affordable price was huge. Unfortunately, the new tech and luxury design made the price difficult to maintain. Legacy automakers like General Motors can afford to lose money as they experiment in the electric vehicle market since they continue to bring in revenue from standard gas-powered vehicles. Tesla does not have that cushion to fall back on.
After an abysmal Q1 earnings report, it looks like Tesla can use all of the cash it can get. Earlier in the month, Tesla raised approximately $2.3 billion by selling convertible notes and new equity to investors. Every dollar is bound to count for a company that has trouble staying in the black, and an additional $400 in revenue for each vehicle sold could mean a profit of $20 million in a quarter if sales remain steady.
For now, the least expensive version of the Model 3 available on Tesla’s website is priced at $39,500. The Model 3 Standard starts at $35,400, and the base price of the Long Range Rear-Wheel Drive will increase by $1,400 in the U.S. (or the equivalent of $1,000 abroad).