The electric-vehicle price war has been raging in the United States since the start of 2023. Led by Elon Musk’s Tesla, the company has been slashing prices on its range of Model 3, Model Y, Model X and Model S vehicles, pressuring other EV makers and traditional automakers alike.
In mid-January, the automaker cut the cost of an entry-level Model 3 by 6.4%, to $43,990. It also slashed the cost of the basic Model Y SUV by 20%, to $52,990. Tesla also lowered prices for its Model S sedan and Model X SUV in January, then again in early March. Ford is the only traditional automaker to have followed Tesla in cutting EV prices in 2023, discounting its plug-in Mustang Mach-E vehicles by between 1% and 8.8%.
Tesla’s dramatic price cuts are aimed at undercutting rivals and boosting market share. But the size of Tesla’s cuts suggest the company is seeking to dominate the entire industry — not just EVs. Jessica Caldwell, the executive director of insights at the car-shopping website Edmunds, told Insider, “We saw interest spike for the Model 3 and the Model Y after the price cuts, so it definitely did move the needle.”
Musk believes the discounts will attract new buyers who previously saw a Tesla as being outside their price range. While it’s too soon to call a winner in the price war, there are signs Tesla is making early gains.
However, there’s a big downside for Tesla in making dramatic price reductions: angering recent buyers. Tesla’s model of selling directly to consumers through its website means price cuts are more easily communicated to would-be buyers. That isn’t the case for traditional automakers that rely mainly on sales via dealer forecourts.
Tesla is reportedly working on a new, more affordable vehicle, expected to cost around $25,000. Dubbed the Model 2, its launch could land a crippling blow to traditional automakers. Dan Ives, an analyst at Wedbush, told Insider, “The lower-priced future Model 2 is key to going after the masses, with the golden goose being a sub-$30,000 vehicle. It’s Tesla’s world with everyone else paying rent.”
It’s too early to declare Tesla the victor in the price war it started, but it looks like the company is taking ground — with potentially more to come in the form of the Model 2.
