Tesla Model Y & Model 3 Cost $10,000 Less Than Average New Car Price

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Much recent discussion around Tesla has been about a lower-cost, smaller Tesla (“Model C” or “Model 2,” as it is often called). In particular, there was the shocking news that Tesla reportedly killed the project in order to focus on a Tesla robotaxi vehicle. It seems that the majority of people following the company and supporting the company think this would be a big mistake. The world needs more good, cheap EVs; and Tesla needs a clear pathway to much higher sales totals. Win–win. So, why kill off the difference maker?

Well, I won’t venture to answer that question here. But there’s a side of this to discuss that doesn’t get enough attention. The Tesla Model 3 and Tesla Model Y are already quite cheap if you step back for a moment. Remember, we are looking at the new car market, and the market is different today than it was in 1990 or 2000 or even 2010. Most people buy used cars. People who could afford a $20,000 new car but not a $40,000 new car are buying used cars — they feel like they get more for their money. Automakers in the US have discontinued almost every cheap car they once produced.

The average new car price in the US is currently $47,244. The Tesla Model 3 and Tesla Model Y are already effectively far below that if your focus is on saving money and not needing too many extra features or battery cells.

The Tesla Model 3, custom ordered, starts at $38,990. Leasing starts at $329/month. The Tesla Model Y starts at $44,990, but that model is also eligible for the $7,500 US tax credit, so it effectively has a starting price of $37,490 if you have that much tax liability (not that amount of taxes due, but just that much liability  — consult a tax expert for details or advice on your situation). In other words, you can get a brand new Tesla Model Y for about $10,000 less than the average new car selling price!

These are insane deals, great value for the money. I don’t think most buyers are aware of this context or how cheaply you can now get a Tesla. I also think Tesla does a very poor job advertising this to people who don’t know it. Nonetheless, it must still be a great sales driver, and I expect the potentially unparalleled value for money at and below the average new car selling price will help Tesla to retain a strong position in the US auto market. Whether Tesla can see much sales growth with just two mass-market models (and a potential third one if the Cybertruck can ever get there), I don’t know and I wouldn’t bet money on it today. But when it comes to talking about affordable new cars or recommending a good new car purchase to a friend, Tesla has positioned itself very well. For what you get at the price you get it, both the Model Y and the Model 3 should be top sellers in the US in 2024.

Rather than being in the “those cars are really expensive” bucket, though, Tesla needs to find better ways to tell people that the Model 3 and Model Y are two of the cheapest cars you can find on the new car market. How many people actually have any idea that you can get a Tesla for about $10,000 less than the average new car selling price?!