Tesla has officially discontinued sales of the base Model 3 RWD (Rear-Wheel Drive) in the United States.
According to an update to Tesla’s Design Studio on Tuesday evening, there are now 3 variants of the Model 3 available in the U.S. – Long Range RWD, Long Range All-Wheel Drive, and the Performance, each starting at US$42,490, US$47,490, and US$54,990 respectively.
All of these trims are eligible for the US$7,500 federal tax credit.
Tesla did not announce the reason behind ending sales of its former base Model 3, which started at US$38,990, but the decision was likely influenced by several key factors. Primarily, the base Model 3 was built with lithium iron phosphate (LFP) batteries sourced from China. While these LFP batteries offer advantages like longer lifespan and lower costs, their Chinese origin ultimately disqualified the Model 3 RWD from the full US$7,500 federal EV tax credit.
In contrast, the Model 3 Long Range RWD, which now sits as the base model in the Model 3 lineup in the US, features a larger battery with a range of 363 miles (584km), and it qualifies for the full federal incentive.
Additionally, the recent tariff hikes on Chinese-made electric vehicles and components played a pivotal role in Tesla’s decision. On October 1, 2024, the Biden administration implemented a significant 100% tariff on Chinese-made electric vehicles, up from the previous 25%. Also on October 1, tariffs on lithium-ion batteries and battery parts have risen to 25%, compared to 7.5% previously.
While the Model 3 RWD was assembled in the US, its dependence on Chinese LFP batteries would have left Tesla vulnerable to higher costs leading to potential price increases.
For Tesla, this shift could further boost demand for its longer-range vehicles and streamline its manufacturing process by reducing the variety of battery types in its lineup. With the Model 3 Long Range RWD qualifying for the US$7,500 federal EV credit and offering more range, it is likely that many potential buyers who had considered the base Model 3 RWD will now turn to the Long Range RWD model instead.
