If the basic Model 3 RWD didn't seem to fit Tesla's lineup in the U.S. until now, it has become even less relevant with President Biden's new tariffs on Chinese electric vehicles and parts now in effect.
New Tariffs Impacting the Market
Earlier this year, the Biden administration announced a significant increase in tariffs on electric vehicles and their components imported from China, which took effect on September 27. The 100% tariff on Chinese electric vehicles marks a steep rise from the previous 25% rate, but it is mostly symbolic since there are currently no such vehicles available in the U.S. market. However, the rise in lithium cell import tariffs from 7.5% to 25% is impacting several automakers, including Tesla, as China is home to the major manufacturers of EV batteries.
Discontinuation of the Base Model
As a result of these changes, Tesla has decided to discontinue the base Model 3 RWD, which was previously the most affordable Tesla model. Although it was the cheapest based on MSRP, its actual pricing ended up being higher than that of the next model up, the RWD Model 3 Long Range. The basic Model 3 RWD was equipped with cost-effective iron phosphate LFP batteries produced by CATL, the largest battery manufacturer in the world. Since CATL is based in China, this model no longer qualifies for the federal tax credit.
New Options for Buyers
In contrast to the discontinued base RWD Model 3, the recently reintroduced Tesla Model 3 LR RWD features a battery pack that qualifies for the full $7,500 federal tax credit. This change has brought its price down from $42,490 to just $34,990, making it the new entry-level Tesla vehicle. The price gap between this and the base Model Y RWD is now only $2,500, making the Model Y an attractive choice for many buyers. Additionally, this new affordable Tesla offers an impressive range of 363 miles, providing a more balanced selection in Tesla's offerings now that the basic RWD Model 3 is no longer available.
