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The “Affordable” Tesla Motors Model 3 is a Steal – For Now

Tesla Motors Inc (TSLA) Model 3 TSLA vs GM Chevy Bolt

Tesla Motors Inc recently confirmed that its mass-market and much-awaited Model 3 will be showcased on March 31, and will debut with a price of $35,000 excluding incentives. With federal and state credits, the cost of the car to the buyer may come somewhere around $25,000. But, not all will be able to get the car at this price as the longer they wait the more expensive the car will get.

Tesla Motors Inc (TSLA) Model 3 TSLA vs GM Chevy Bolt

Tesla affordable car – not for everyone

With Federal tax incentive worth $7500, the buyers would get the Model 3 for $27,500. In addition, there are several states that offer additional tax credits, thus, lowering the price even further. Though it all sounds great, it must be noted that these tax credits won’t be available in perpetuity. Rather, the EV tax incentives law says the $7,500 tax credit will expire when the sales hits 200,000 units in the US. After the expiry, the credit will drop to $3,750 for six months, and $1,875 for the next six month period.

So, it means the buyers, who buy the Model 3 before Tesla Motors Inc sells its 200,000th vehicle in the US, will be eligible to get the car cheap. But, this raises a question, when will Tesla hit the 200,000 unit sales in the US. The EV firm does not break down the sales figure on a country by country basis, but a report from Electrek came up with some interesting projections on when the firm will hit the mark.

Fred Lambert of Electrek founds that Tesla Motors Inc will hit 200,000 threshold in 2018 assuming the US sales being 40-50% of the global sales. “That means that for most of 2019 Tesla buyers won’t likely have much federal incentive to buy cars,” Lambert writes. “By 2020, the Federal Subsidy will have run out.”

Luxury and affordability

A luxury brand bringing an affordable car is not new, but the hype surrounding the Tesla’s newest car could put pressure on other brands to make their entry-level line-up more robust. Currently, luxury brands like Audi, Mercedes-Benz and BMW do offer cars within $30,000 to $35,000 price range. For instance, 2016 Audi A3 sells a $30,900, the Mercedes CLA Class begins with $32,050 and BMW 3 series retails for $33,150.

Such cars are generally offered to the younger customers, who are more likely to become brand loyalists as they move up in their career. “Brand loyalty [for cars] is at an all-time low. More companies are starting to market to customers at an early age with a low-priced car,” says senior analyst at Kelley Blue – Karl Brauer.

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Aman is MBA (Finance) with an experience on both marketing and Finance side. He has work as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, playing PC games and cricket.