Tesla has implemented another wave of price cuts across its Model 3 and Model Y vehicles. It’s the second time this month, resulting in its electric cars starting under $40,000 before incentives.

After consistently and gradually increasing its electric vehicle prices over the last two years, Tesla has started bringing those prices down in 2023 to keep demand up.

It started with a big price drop in early January, and then some smaller price adjustments after with the latest coming in February for Model 3 and Model Y, and last month for Model S and Model X.

We thought Tesla would take a break from reducing prices, but the automaker again slashed prices across its entire lineup earlier this month.

Now just a few weeks later, Tesla is again adjusting prices down on Model 3 and Model Y in the US, and not by a small amount.

Tesla Model 3 prices

The Model 3 Standard Range RWD, Tesla’s cheapest vehicle, went from $41,990 to $39,990.

It’s the first time in a long time that Tesla has an electric vehicle starting at less than $40,000 for a brand-new vehicle to order.

However, it’s important to note that in this case, this is Tesla’s only model to have seen its federal tax credit being reduced from $7,500 to $3,750 following the battery source requirements.

It appears Tesla is trying to counter the reduced incentive with a direct price cut.

The Model 3 Performance is staying the same price and Tesla has yet to reopen orders for the Model 3 Long Range in the US.

Tesla Model Y prices

In this new price update tonight, Tesla has greatly reduced Model Y prices across the entire lineup.

Each variant saw its price cut by $3,000 overnight:

• Model Y AWD: went from $49,990 to $43,990
• Model Y Long Range: went from $52,990 to $49,990
• Model Y Performance: went from $56,990 to $53,990

Unlike the Model 3, all new Model Y vehicles qualify for the full $7,500 tax credit. In some markets with state incentives, the Model Y will start at around $35,000 for a brand new vehicle.