The Tesla Model 3 and Model Y, the brand’s highest-selling electric cars globally, cost less than the average transaction price for a car in the US, according to a new report. Bloomberg stated that the price war might cost the company $1.2 billion a year, but the trade-off is price parity with gas cars and trucks.
The entry-level rear-wheel-drive Tesla Model 3 costs $38,990 before taxes and additional fees, $8,700 lower than the average price of a car or truck in the US, as per the report. The Model 3 now costs $6,500 less than the entry-level BMW 3 Series, and $5,800 less than the base Mercedes-Benz C-Class.
That’s before factoring in the $7,500 federal tax credit and state incentives. After applying the federal tax credit and fuel savings, the Model 3’s cost of ownership is on par with a Toyota Corolla, claims the report.
Let’s see if this claim holds up. According to the EPA, the average annual gas cost of a 2023 Toyota Corolla is $1,650. The entry variant’s MSRP is $21,900. Based purely on gas prices and base MSRP, excluding maintenance and other expenses, Corolla’s ownership cost over three years would be roughly $26,850.
The Model 3’s ownership cost estimate for New York is more. Tesla estimates $3,000 in gas savings over three years. But with an estimated annual charging cost of $550 as per the EPA, and after factoring in the $7,500 federal tax credit, plus the $2,000 New York State credit, the Model 3 would probably cost around $31,000, before taxes and fees, over three years.
Note that the figures will vary regionally, and these estimates are conservative as they don’t factor in maintenance costs, sales tax, and other fees.
However, the price cuts and investments in Cybertruck production have squeezed the brand's profit margins – dropping from 26 percent last year to 18.1 percent in Q2 2023, according to the Q2 earnings call. Tesla’s Q3 2023 sales were also down by roughly 30,000 units compared to the previous quarter due to factory downtime, with 435,059 deliveries worldwide between July and September 2023.