Tesla cuts $4,000 off Model 3 price with new mid-range battery

Tesla Inc. began selling a cheaper version of its Model 3 sedan Thursday, but the price tag is still higher than originally promised and federal tax incentives that could bring down the price are set to expire.

The new version features a new mid-range battery and a starting price of $45,000, the electric car maker said late Thursday — $4,000 less than the previous starting price of $49,000. For well more than a year, Tesla TSLA, -2.90%  has been touting an eventual Model S with a base price of $35,000 that will be affordable enough to appeal to the masses, but one still is not available.

In August, UBS analysts said Tesla would lose money on a Model 3 with a base price of $35,000. Tesla’s website says the standard version, which would be expected to have that base price, will begin selling in four to six months.

In a tweet Thursday, Tesla Chief Executive Elon Musk claimed the new model “Costs $35k after federal & state tax rebates in California, but true cost of ownership is closer to $31k after gas savings.”

However, the tax rebates that apply to all in the U.S. are expiring — since Tesla has hit a key threshold for deliveries, the federal $7,500 electric-vehicle tax credit will be phased out starting in 2019. For buyers who take delivery from Jan. 1 to June 30, 2019, the credit will drop by half to $3,750, and halved again for the period from July 1 to Dec. 31, 2019, then eliminated entirely in 2020.

Tesla expects to start delivering the Model 3 with the new mid-range batteries in six to 10 weeks, the company said.

“As Model 3 production and sales continue to grow rapidly, we’ve achieved a steady volume in manufacturing capacity, allowing us to diversify our product offering to even more customers,” a Tesla spokesperson said in a statement. “Our new mid-range battery is being introduced this week in the U.S. and Canada to better meet the varying range needs of the many customers eager to own Model 3.”

The new version has a range of 260 miles, Tesla said on its website, compared with the previously available 310-mile long-range battery pack. Musk added on Twitter that long-range batteries, rear-wheel drive and “full self driving” capabilities will be available for only the next week, and will be “off menu” options.

Tesla stock has declined 15.2% so far this year, as the S&P 500 index SPX, -1.44%  has gained 3.6%.

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