After numerous price decreases this year, the Tesla Product Y now costs significantly less than the typical new automobile in the United States, EV or not. This is the conclusion of a recent Bloomberg article that compares Tesla Design Y price reductions to average new vehicle prices in 2023.

Bloomberg notes that the base price of the Model Y has decreased by 24% since January, the steepest price cut of any Tesla product, and that the Model Y and connected Model 3 sedan have never been priced below the average cost of a new vehicle in the United States.

The current base price of $49,990 is $2,241 more than the average price of a new car in the United States, but it is anticipated that Product Y will qualify for the full $7,500 federal tax credit history. This reduces the effective price to $42,490, approximately $5,300 less than the average price paid for a new vehicle in the United States in March, according to the report, which cites Edmunds data.

Bloomberg views these price reductions as revolutionary. Tom Randall, the author of the blog post, wrote that the Design x price cuts may be comparable to Ford’s reduction of Model T prices in the 1920s and tweeted that Tesla has begun a price war with manufacturers of internal combustion engine vehicles.

Other factors may also be at play, however. This may indicate that the imminent Product 3 and Model Y refresh is imminent. Tesla only discloses product information as part of financial updates and comments from its CEO, but if Bloomberg’s investigation is any indication, this may soon change.

Nevertheless, Tesla’s most recent sales figures indicate that despite the price reductions, the company is falling behind on deliveries as opposed to production, indicating that additional price cuts may be necessary. Tesla has reportedly made enormous gains in areas where EV development is robust, such as California, and it is the only EV manufacturer that has stepped up to meet demand.

Tesla has previously challenged to meet robust EV demand. After announcing the Model 3 in 2016, Tesla’s CEO Elon Musk was surprised by the demand for the vehicle. After increasing its prices in 2021, Tesla cited a “profound awakening of demand for EVs” that had taken the company by surprise.

Recognised manufacturers are also calculating EV costs and potential demand, but with a different method than Tesla. Stellantis’ executive for Ram referred to EV pricing pressure as “the elephant in the room,” and Ford CEO Jim Farley has been planning for an EV price war.

Unlike Tesla, manufacturers such as Stellantis and Ford have gasoline-car sales as a backup revenue source. A recent report from S&P Global Mobility emphasised that, given heightened levels of competition, full-line manufacturers require the profits from large petrol pickups to fund investment and expansion in EVs.