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  HOME | Business & Economy (Click here for more)

Tesla Cuts Model 3 Prices Again as Tax Credit Fades

NEW YORK – Tesla Inc. cut the price of its mass-market Model 3 sedan for the second time this year, with Chief Executive Elon Musk touting that the electric car now carries the long-promised $35,000 price tag, when including discounts and gas savings.

Tesla shaved $1,100 off of the cheapest version of the Model 3, lowering the sticker price to $42,900. Last month, the company lowered prices by $2,000 for the entry version, after a federal tax credit for buyers of electric vehicles was cut in half on Jan. 1.

In an overnight tweet, Musk put the price, with savings, at around $35,000. Tesla, on its website, now advertises a price for the Model 3 of $34,850. That includes what Tesla says is $3,750 in still-existing tax credits and $4,300 in promised gas savings.

The Model 3 is facing an effective price increase in the United States this year as the government gradually eliminates a $7,500 tax credit for the purchase of electric vehicles. For Tesla buyers, that credit fell to $3,750 on Jan. 1 and will be cut in half again on July 1 before phasing out by year-end.

To help lower the cost of the car while bolstering profits, Tesla last month announced plans to eliminate 7 percent of its full-time workforce. It was the second round of layoffs Tesla announced within the year.

Shares of Tesla fell 0.8 percent to $318.77 in premarket trading. Tesla faces in March a $920 million debt payment, which it will have to pay down entirely with cash if its shares remain on average below the strike price of $359.87.

Tesla late last month reported a $139 million fourth-quarter profit. It marked the first successive quarterly profit for the car maker. It also boosted its cash position to about $3.7 billion. Musk has promised Tesla would deliver a profit every quarter this year.

The Model 3 is key to Tesla’s goal of boosting output and profit. But cranking up production has been a headache. Tesla last quarter delivered 63,100 Model 3 cars, or 1,750 fewer than analysts had expected. Total deliveries for the full year reached 245,240.

In July, Tesla for the first time met its target of making 5,000 Model 3s a week. That required special effort, including building a giant tent outside the company factory to add a third assembly line. The steady production rate of Model 3s is key to driving Tesla’s cash generation.

Tesla has promised to build between 360,000 and 400,000 cars this year. It has said Model 3 production should reach about 7,000 cars a week by year-end. Tesla is also building an assembly line in Shanghai, which the car maker says will bring weekly Model 3 output to 10,000 cars. Model 3 deliveries to Europe and China are starting this year, slowing first-quarter handovers of the model in the US, the company said.

Tesla also produces the luxury Model S sedan and the Model X sport-utility vehicle.


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