Huge Tesla price cuts in the US

Well, this is going to be interesting. Tesla has declared inflation to be over. They’ve been saying for months that commodity prices have been falling. And now their costs are low enough for them to go back to pricing similar to two years ago.

  • Model 3 RWD: $43,990 (-$3,000/6.4%)
  • Model 3 P: $53,990 (-$11,000/17%)
  • Model Y Long Range: $52,990 (-$13,000/19.7%)
  • Model Y P: $56,990 (-$13,000/18.6%)

They already dropped prices in China, and now this, along with similar cuts in Canada and Europe. Big drops in Model S and Model X as well. So in the US, pretty much everything will get tax incentives, which makes the cars cost less than ever to the consumer.

So now nobody will be wondering if Tesla can increase production 50%+ this year and sell all their cars. They’ll be complaining that Tesla margins won’t be as fat as before. But since Tesla’s margins are by far the highest in the industry, and their cost-cutting has been relentless, I think margins will remain above 20%.

Simply phenomenal!



Rob Maurer on Tesla Daily shows Fed inflation data, Price Consumer Index less food, energy, and housing is falling:

Price cuts at the start of the video.

The Captain


Have to agree with you. The pundits have got this one wrong. Can you image how Volkswagen, GM, BMW, Mercede and Ford are viewing this development? Ouch. I can only image how much demand is going to be unleashed when an M3 is cheaper than BMW 3 series and $10K more than a Bolt.

As Tesla has been busy adding capacity at Brandenburg, Austin and Shanghai the Capex will drop off somewhat as the deep expenditures for new plants begins to fall and capacity comes online. I am curious to see profitibility and marging numbers for 2023.

My wife is a little annoyed as we bought our MY in December 2021 so paid a hefty premium. Oh well. It is a bit like trying to time the stock market.


Checked sizes. Bumper to bumper sizes, the model Y is about the same size as a Toyota Highlander.

A nicely equipped new Highlander can be had for between 40 and 45 k in Florida.

A Model Y long range is 52k.

Call it a 12k difference. The Highlander gets about 25 miles to the gallon. So, 12,000 dollars will buy about 4000 gallons of gas. so it will run with no energy input cost (at 3 dollars a gallon for gasoline which is typical in the pan handle of Florida now) for about a 100,000 miles.

While I expect the driving experience to be much better in the Tesla, the Toyota while being the same length as the Tesla has a larger interior. So, over a huge population of people, about the same. Noting that everyone has a different use case.

I mention this not to run down Tesla. Not at all. I own a 2013 Venza. While it is a reliable comfortable car, I dislike the car to the point that I will probably never buy another Toyota.

I mention it because the are both suppose to be quality SUV’s and they are the same size, and while the Toyota has some reputation premium it does not have a “cool” guy factor like Mercedes or BMW or Cadillac.

At this time, the model Y will only be competitive with a rebate (if it is even eligible under Inflation Reduction Act) and in high fuel cost low electrical cost areas. This again is not a hit against Tesla business model either now or in the future.


Tesla could probably sell every car it could build in just those areas this year.

Why not in the future?

The 80kw battery pack probably cost Tesla a little under 100 dollars a kilowatt hour to put into the car at the factory. (I know this is a lot less than a replacement battery pack, such is life. Try buying a factory crate engine with all of its accessories, that would be a owie!) That works out to 8,000 dollars for the battery pack. This does not include the 10k or so that I have calculated that all car companies will need to spend per car to build out enough battery manufacturing to produce all cars as EV’s. I do not foresee this happening in less than 5 years.

I mention these things because we can reasonably expect, based on simple inductive reasoning, that it will cost Tesla about 4k to produce that same battery pack in 2026. This shaves more than 4k off the price of the car as that battery pack is carrying a 30 percent mark up. In other words, excluding slowing down of battery plant build out, excluding gains in other aspects of building a model Y, the relative cost for a model y will have dropped to within 6k of a Highlander by 2026. Moreover, I do expect battery factories to get less expensive, I do expect that there will be gains in building controllers, motors, frames and interiors of the model y buy 2026. I expect these gains to be in excess of 4k at the factory floor and with a 30 percent margin we can expect another 6 price drop relative to a Highlander by 2026. This thought exercise leads me to believe that at least in this instance, Tesla will be able to compete for the plain Jane (or Wendy) dollar by 2026 and retain its margins.

Of course nothing is straight forward. A Tesla is not a Toyota.

I want to reiterate, while on absolute practical basis, the Model Y does not get the nod in 2023, the time is coming soon when it will. My prediction several years ago was that a full EV and full ICE sitting side by side on a dealer lot would be priced about the same without government incentives.

Also, I have no idea if Tesla is a good investment. I hold no Tesla stock. I do think that a Tesla model Y and the manufacturing methods of a Tesla model Y is a good proxy for a common household vehicle in 2025 or 2026.


For about $4000 more you can get a Highlander hybrid which gets ~36 mpg…44% better


During the year or two that I had my Highlander Hybrid Limited in my driveway along with my Teslas, I think I drove the Highlander only three times. And every time it was a horrible experience compared to the Teslas. A Tesla is so much better a vehicle, in every dimension, that the comparison is just silly.



During the year or two that I had my Highlander Hybrid Limited in my driveway along with my Teslas, I think I drove the Highlander only three times. And every time it was a horrible experience compared to the Teslas. A Tesla is so much better a vehicle, in every dimension, that the comparison is just silly.


My comparison was based strictly on size and utilitarian use. Had I wanted to compare awesome to awesome I would have researched other vehicles about the same size with awesome reviews.

My point is that for people who know that the difference between staying financially afloat is 1 or 2 hundred dollars a month in car payments, or 50 or 100 dollars a month in gas, the Highlander gets the job done. It currently gets it done cheaper than the Tesla.

This will not always be the case. I have shown in other posts that these two vehicles will reach a cross over point with a few years. My estimate some years ago was 2025. I am not entirely comfortable with that, but it does not seem unreasonable either.


But people in such a position are certainly eligible for whatever tax credits are available. So that $53K (not $52K) for a Model Y becomes $45.5K. So it’s pretty much a wash right now in terms of cost? And the Model Y is likely cheaper if their state offers any incentives?

Seems like big trouble for Toyota.



Yes that would be a BIG problem.