The Tesla Model 3 Could Keep Going Down In Price

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The Tesla Model 3 must keep going down in price. Here's why.

What's going on with the Tesla Model 3

Model Y inventory is visible and is going down sharply. However, Model 3 vehicles in inventory have not been going down as sharply. The Model Y is a good deal with the IRA tax credit and all the storage, space, and charging, along with it being an SUV.

Sedans are an underrated vehicle, but there is an increase in Model 3 inventory. Is the Model Y cannibalizing the Model 3 in sales? The Model Y has much more storage space and is easier to get in. People love hatchbacks and lots of space inside a vehicle.

You cannot order a Model 3 long range from Tesla's website unless you buy from existing inventory. There's no custom building, but it is only about $3,000 less than the long range Model Y. This is good for consumers, but bad for Tesla. The Model 3 needs to come down in price somehow.

The Model 3 probably isn't being built with front castings yet. Tesla can build up inventory now and eventually shut down the production lines to take advantage of front and rear castings and other cost reducing production measures.

If Tesla does want to get their inventory off their factory lots, they could drop prices even more for the Model 3 RWD, the Model 3 long range, and the Model 3 performance.

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What will make it go down in price?

The $7,500 tax credit may no longer qualify after March 2023 for the Model 3 RWD. The reason is because that vehicle uses the LFP battery from CATL. Then Tesla would really have to lower the price without a tax credit and the Model Y getting a tax credit.

Tesla could offer free supercharging miles - let's say 10,000 miles, and that might make people feel better about purchasing a Model 3. Tesla could offer premium connectivity for a longer period of time.

It could revamp the referral program, which got people to create content about Tesla vehicles on TikTok or other social media platforms. Referral credits can be used for Tesla merchandise or even Tesla FSD or Advanced Autopilot software.

The referral program is pretty lackluster right now, though.

Tesla needs to update the Model 3 with single piece castings. It really comes down to getting the cost lower. Tesla has talked about Project Highland - and part of that will likely involve single piece castings.

There might be some reasons that Tesla can't switch the Model 3 yet. Idra is supplying all of Tesla's Giga presses, and they are busy shipping presses to Giga Texas and to Giga Shanghai - but nobody knows exactly what they are for, whether a Model 2 or some other vehicle.

If Tesla can't update the Model 3 line in Fremont right now, then they need to compromise on parts of the Model 3. 330 miles of range on the Model Y is plenty. A 358 range Model 3 long range is great too.

Tesla could reduce the size of the battery pack, but that is more of a controversial option. For most people who have charging at their apartment or home, you can do your daily driving with about 80 miles, and that is good enough for your vehicle's needs. Tesla could revamp a 2023 Model 3 with a smaller battery pack for each version, and those could sell closer to $35,000.

What can Tesla do to get the Model 3 closer to $35,000? Should Tesla do that?

In Related News: Tesla FSD Finishes 2022 With 285K Users

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Jeremy Johnson is a Tesla investor and supporter. He first invested in Tesla in 2017 after years of following Elon Musk and admiring his work ethic and intelligence. Since then, he's become a Tesla bull, covering anything about Tesla he can find, while also dabbling in other electric vehicle companies. Jeremy covers Tesla developments at Torque News. You can follow him on Twitter or LinkedIn to stay in touch and follow his Tesla news coverage on Torque News.

Image Credit, Tesla, Screenshot