Competition heats up as Tesla cuts price of Model 3 and Model Y electric cars

Tesla has dropped the price of its base-level Model 3 electric sedan and Model Y electric crossover in the US, but raised the prices of its performance variants. Australia is expected to follow suit.

The Californian EV maker dropped the price of the Standard Range Plus (SR+) Model 3 by $US1,000 to $US36,990 ($A47,612 converted) and by $US2,000 for the Standard Range Plus Model Y, which is now priced from $US39,990 ($A51,474) before add-ons and on-road costs.

(Australian prices are significantly higher than the forex translations, partly due to transport, GST and other fees).

But the move from Tesla signals that competition appears to be heating up in the US electric vehicle market. On Monday, GM unveiled its newly made over – and cheaper – Bolt EV, which now costs from $US36,500 ($A46,891 converted), alongside the slightly larger Bolt EUV.

Ford unveiled its Tesla rival, the Mach-E, in November pricing it from $42,895 ($A55,213 converted).

According to the US fueleconomy.gov website, GM and Tesla electric vehicles are no longer eligible for federal tax credits, while the Ford Mach-E is eligible for the full $US7,500 tax credit.

Tesla’s price drops come shortly on the heels of big commitments from US auto giants General Motors (GM) and Ford to embrace the shift towards electrification of transport to reduce carbon emissions.

On Thursday (Australia time), Ford said it will only sell all-electric vehicles from 2030, following a phase-out to only “zero-emissions capable” vehicles from 2024. In Europe, increasingly strict vehicle emissions regulations will slam carmakers with big fines if they don’t reduce their fleet emissions.

At the end of January, GM said just weeks after new president Joe Biden committed to transition the entire US government fleet to electric, that it will aim to ditch all vehicles with tailpipe emissions by 2035 as it aims to achieve carbon neutrality by 2040.

Both commitments are an indication of the certainty that strong policy can bring to carmakers to make the shift to electric.

Both moves also indicate the pressure is mounting on Tesla, which has accelerated the electric vehicle transition by introducing more affordable models both in the US and overseas.

In Australia, the 2019 arrival of the Model 3 – which locally costs from $A66,900 before on road costs such as stamp duty and registration – saw EV sales triple in a country where a lack of policy has stagnated the market.

The new price for the Performance Model 3 is $US55,990 ($A72,068 converted, up from $US54,990) and for the Performance Model Y it is $US60,990 ($A78,504 converted, up from $US59,990), Tesla’s US website says.

In Australia, it was thought that the introduction of the Shanghai-built Model 3 which uses a cheaper lithium-iron phosphate battery may result in a local price decrease, but this has not yet eventuated. A big price drop was implemented in late 2020 when Tesla dropped local pricing from $73,900 to $66,900 for the SR+ Model 3 due to foreign exchange movements.

The Model Y is not yet available to order in Australia, and Tesla did not comment on when this will be when The Driven requested more information. There is speculation it could be as early as December.