Tesla has officially discontinued its least expensive electric vehicle (EV), the Model 3 Standard Range Rear-Wheel-Drive (RWD), in a move that appears to be driven by recent changes in United States (U.S.) trade policies and federal incentives for EVs.

The entry-level Model 3, which started at $38,990, has vanished from Tesla’s online configurator, leaving the $42,490 Model 3 Long Range RWD as the new base model. This change represents a $3,500 increase in the starting price for Tesla’s most affordable offering.

Several key factors likely influenced Tesla’s decision to discontinue the previous base Model 3. One major consideration was the tariffs on Chinese EVs and components. The discontinued model was the last Tesla in the U.S. to use lithium iron phosphate (LFP) battery cells sourced from China, and recent tariff increases made this configuration less economically viable. 

Additionally, the use of these Chinese-made batteries rendered the base Model 3 ineligible for the full $7,500 federal tax credit, putting it at a disadvantage compared to other Tesla models. By removing the LFP battery option, Tesla can alsostreamline its production process, reducing the complexity of having multiple battery types in its lineup.

For buyers, the change brings both advantages and trade-offs. The new entry-level Tesla now offers a significantly improved range of 363 miles, up from the 272 miles of the discontinued version. However, this upgrade comes with a $3,500 increase in the base price. On the bright side, the new model qualifies for the full $7,500 federal tax credit, which could offset the price hike for eligible buyers. 

After applying the federal tax credit, the effective price of the new base model could be as low as $34,990, excluding any additional state incentives or savings from reduced fuel costs.

This move comes in the wake of the Biden administration’s decision to increase tariffs on Chinese EVs and batteries, which went into effect on September 27, 2024. The tariff rate for imported Chinese EVs jumped from 25% to 100%, while lithium-ion batteries and battery parts are now subject to a 25% tariff, up from 7.5% previously.

Tesla’s decision to discontinue its most affordable model highlights the complex interplay between international trade policies, federal incentives, and the evolving landscape of the EV market. As automakers continue to navigate these challenges, buyers may see further shifts in vehicle offerings and pricing strategies across the industry.

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For now, Tesla enthusiasts and potential buyers will need to adjust to a slightly higher entry point for the Model 3, albeit with increased range and potential tax savings to offset the price increase.

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