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Tesla Makes Second Price Cut of its Model 3


US electric carmaker Tesla Inc. announces on Wednesday its plans to slash the price of its Model 3 sedan for the second time this year, as the company’s tax credit, which has helped made its vehicles more affordable, phased out.

Tesla stated that it was lowering the price of the Model 3 by $1,100, bringing the starting price of its cheapest model down to $42,900 before incentives, which is still significantly higher than the $35,000 price that Tesla Chief Executive Elon Musk initially promised.

All three versions of the car had undergone the same price adjustment, including the rear-wheel drive, all-wheel drive, and performance models.

The latest price reduction followed the $2,000 cut carried out in January, when a US federal tax credit started phasing out for the Palo Alto-based firm, effectively increasing the price of vehicles by $3,750.

A Super Hard Grind

Tesla is ramping up production of the Model 3 and trying to make it more available for mainstream buyers. The company has also been slashing costs as it intends to turn in profits this year.

The firm delivered fewer-than-expected Model 3 sedans in the fourth quarter and dropped prices for all its vehicles in the US to offset a reduction in a green tax credit.

Musk said Tesla is doing everything it can to drop the Model 3’s starting price to $35,000, without credits, That target price represents both affordability and mass-market scale, but the Tesla CEO added that it is a super hard grind to achieve that price.

In the past few months, Musk has been pushing for cost-reducing plans, such as job layoffs and ending its customer referral incentive program, which the automaker said cost far more than realized.

The referral plan ended on February 1 after Musk stated that the program was raising the cost of the cars further, especially the Model 3.

If Tesla aims to produce $35,000 version of the Model 3 and still be a viable company, it has to achieve greater economies of scale, Musk said in a letter sent back last month announcing the job cuts.

Shares of Tesla fell 0.5 percent to $319.57 in pre-market trading on Wednesday.

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