Here's What Happened to the $35,000 Tesla Model 3
The highly anticipated, affordable Tesla never quite panned out because it didn't fit the company's strategy.
If you're an electric car fan, chances are you're familiar with pioneering brand Tesla's promise to build an affordable EV. Founder Elon Musk first broached the subject back in 2013 when he mentioned that the company was on track to produce a vehicle called the Model 3. The car was supposed to cost much less than the existing Model S, with a price promised in the $35,000 range.
Close to half a million customers placed $1,000 deposits on new Model 3s after the vehicle was announced, but extensive production delays made it difficult for those orders to be filled in the early months following its official on-sale date. While the Tesla Model 3 did eventually arrive in the latter half of 2017, the $35,000 version was nowhere to be found. In fact, the low-priced Model 3 eventually became not a sales volume leader for the brand, but the rarest trim level of all—and one that’s no longer even available.
What happened to the $35,000 Tesla Model 3? The answer lies in the shifting priorities and hard economic environment facing electric car companies.
Tesla Was Overpromising and Under-Delivering
"Tesla has a history of overpromising and under-delivering when it comes to pricing, and the Model 3 is a prime example," said Ed Kim, president and chief analyst at leading industry research firm AutoPacific. "Long touted prior to launch as the brand's $35,000, entry-level vehicle, the Model 3 certainly didn’t launch at that price, though Tesla promised the $35,000 version was still coming."
Why didn't Tesla stick to the $35K script when the Model 3 launched? When asked that exact question in 2018, Tesla's CEO pointed to cash-flow needs at the company that required it to focus on profitable trim levels first before moving on to its affordable entry-level car.
"Shipping min cost Model 3 right away wd cause Tesla to lose money and die," was Musk's tweeted reply. He went on to explain that it could take up to six months before the $35,000 car was officially available. That projected waiting period stretched far longer than the initial estimate.
"The so-called Standard Range model did exist for a brief moment in 2019 before it was quietly and quickly discontinued," Kim said. "Technically, it did mean that Tesla did deliver on its promise of a $35,000 Model 3, though it was too small a volume to make up a meaningful share of total Model 3 production."
The Tesla Model 3 Was Difficult to Find, Harder to Order
Not only was the Standard Range car on sale for only a short period of time—it lasted mere months on the market—but it was also notoriously difficult to order. At the time of the car’s launch in the first quarter of 2019, the company began closing brick-and-mortar points of sale in favor of an online shopping model that it claimed was part of a cost-reduction plan to help make it feasible to sell the Model 3 at its advertised $35,000 starting price.
That shift online actually made it more difficult to buy the base Model 3. The vehicle was removed from the company's website, which meant that ordering over the phone or finding one of the remaining Tesla storefronts was the only way to secure this particular version of the car. Even then, Tesla pivoted to hawking a software-locked version of a slightly higher-trim Model 3 at a discount that brought its sticker price down to the $35k level, a strategy that lasted only a short while. That car came with a reduced battery capacity, no Autopilot feature, no fog lights, and a less-impressive audio system.
As late as 2020, devoted Tesla fans could still finagle their way behind the wheel of a $35,000 Model 3 if they were willing to parse a labyrinthine ordering process. They were forced to build a more expensive version of the car using its online configurator (the Model 3 Standard Range Plus, which then retailed for about $40,000), bail out at the paperwork step, and then call the company directly to have the order altered to a Standard Range model.
Shifting Tesla Business Needs Equals High Production Costs
Why did Tesla initially drop the ball when it came to building its promised $35,000 Model 3? In a word, cost. Musk himself said it was “excruciatingly difficult” to build the vehicle for that advertised price, a fact that AutoPacific's Kim corroborated.
"Battery packs are by far the single-most expensive component of an EV, and automakers building EVs make the business case for their EVs pencil by having a high mix of well-optioned models to help offset the high cost of the battery packs," Kim said. "The Model 3 was Tesla’s first volume vehicle, and as a publicly traded company, Tesla was under great pressure to deliver healthy financial numbers."
With that context it's clear why focusing on a high-volume, affordable car became less and less of a priority at Tesla as the company was able to offset production investments and generate more substantial profits through sales of highly optioned cars including upscale versions of the Model 3.
"Frankly, demand for higher-priced Model 3 versions was (and is) strong enough that Tesla didn't need to focus on lower-margin, entry-level versions," Kim said. "Today, Model 3 and Model Y volumes remain extremely strong, with the two combined accounting for around 70% of all EV volume in the U.S. market even with today's much higher base prices for both models. So, it's pretty easy to see why Tesla didn't see fit to keep the $35,000 Standard Range model for very long."