Tesla drops its most affordable Model 3 as US tariffs hit Chinese-made components

Tesla has quietly discontinued the Standard Range Rear-Wheel Drive version of its Model 3 sedan, previously its most affordable offering in the US. 

Priced at $38,990, the model was removed from Tesla’s website as of Wednesday, according to Reuters. The move raises the starting price of Tesla’s entry-level car to $42,490 with the Model 3 Long Range Rear-Wheel Drive now being the most affordable option.

The discontinued model featured lithium iron phosphate (LFP) batteries sourced from China, and the decision comes in the wake of new US tariffs. 

The US recently imposed a 100% tariff on electric vehicles (EVs) imported from China and a 25% tariff on EV batteries and critical minerals.

Due to the reliance on Chinese-made components, including LFP batteries, Tesla’s Standard Range Model 3 was no longer eligible for the $7,500 federal tax credit, further complicating its affordability.

Affordability challenges continue to plague the EV market, with most electric vehicles, including Tesla's, being more expensive than their gas-powered counterparts. Tesla has long hinted at producing a more affordable vehicle, but no such model has been released yet.

The discontinuation of the Standard Range Model 3 came as Tesla slightly exceeded analysts' expectations for vehicle deliveries, with third-quarter sales rising to 462,890 vehicles. 

Tesla also faces increasing competition from China, where companies like Xpeng, Nio, and BYD are launching more affordable EV options. 

Xpeng’s new Mona M03, priced at just $16,800, is less than half the price of Tesla's Model 3 in China. Nio and BYD are also planning to introduce a new affordable brand called Onvo, set to compete with Tesla's Model Y.

Additionally, Nio plans to launch a second brand called Firefly, with vehicles retailing for under $30,000. Analysts expect over 100 new EV models to launch in China by the end of 2024, spurred by government policies promoting affordable EVs.

Tesla has yet to comment on the discontinuation of the Model 3 Standard Range or its future plans for affordable EVs.