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What If Tesla Introduces the Model 3 for $35,000 Before Incentives?

It would be the prime mover in luxury, performance, economy and cost in the entry-level sports sedan market.  Period.

Last week Elon Musk announced the goal at the 2015 Detroit Auto Show.

The Model 3 would come in at around $27-28,000 with federal incentives.  Which would put it in direct price competition with the base models of American made sports sedans.

Which means it would leave the Europeans behind, and give Tesla a leg up in the process of bringing in customers to move up the model ladder.

Do I need to list the prices of a Mercedes C-Class, BMW 3-Series, Audi A4, Jaguar XE, Volvo S60, etc?  Only VW would have something in that price range–and it’s not all electric and made by the hottest marque in the automotive world?

Here’s another way to think about it.  Kia just announced that they’re pricing their Soul EV at $27,000, including incentives.  Hmmm, a Kia or a Tesla?  Please, how easy is that decision?

Jalopnik does a little more math on the prospect, in a scenario comparing the Model 3 to a BMW 320i:

The following scenario is speculative and is based on a few assumptions. The first is is that the Model 3 would indeed carry a purchase price of about $35,000. The second assumption is that the Tesla would maintain the same residual, or resale value, as a similarly priced BMW 320i sedan, which would be roughly 60%. Given the lease programs that Tesla is already offering on the Model S, I don’t think this is too far fetched. I also do not include any tax, title, and tag fees as they vary from location to location.


Let’s first have a look at a lease offer from what is most likely the Model 3 primary target, the BMW 3-series. The 320 is what many call the “lease special” it is the least expensive sedan you can get. Right now you can have a BMW in your driveway for as little at $309/mo for 39 months.


Here’s where the numbers get really crazy, and where the opportunity is for Tesla to become the car everyone looks at before buying almost anything else:

Even if your head is spinning from all that math, here is what you need to think about. We know the lease is mostly determined by the purchase price over the residual value, what if the purchase price on a $35,000 is now reduced by $7500? As that is how it works with EV leases, the lease company takes the tax credit and deducts it from the sale price. Now we have a Model 3 that has a purchase price of $27,500. If the Tesla can maintain the same 60% residual value as the BMW for a resale of about $22,000. The difference is $5500 divide that by 39 months and you have a payment of 141/mo, multiply the same .0013 money factor for a total of $160/mo (before taxes and fees).


Say Jalopnik’s numbers are a little low, and the Tesla comes in at $225/mo. for a lease.  That’s just $225 per month to stop buying gas.  Plus insurance and about $20-35/month if you charge at home, on a plan.  You’d be a fool if you didn’t look at a Model 3.

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Sebastian James


Accept no substitutes

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