SAN FRANCISCO -- Tesla Inc. said on Thursday it will offer a $35,000 version of its Model 3 sedan with a shorter battery range and new interior, nearly two years after the company originally promised the car at that price.
The Model 3, when first shown off by CEO Elon Musk in March 2016, was promised to be a $35,000 car -- before incentives -- to appeal to the mass market. But Tesla had never managed to sell the car at that price. Musk said last month he hoped the lowest price version would be available in mid-2019.
Tesla has twice this year lowered the price on the Model 3, which currently starts at $42,900. A U.S. federal tax credit began phasing out for Tesla in January, effectively raising the price of cars by $3,750.
A $35,000 Model 3 is a major shot in the arm for Tesla during a period of major challenges for the Silicon Valley company and could put to rest concerns among some analysts that demand for Tesla's vehicles might be constrained in 2019. Besides the Model 3, Tesla is developing a new Model Y SUV for 2020 production, while beginning to build a factory in Shanghai.
Tesla stunned the automotive world after its reservations list for the promised $35,000 Model 3 ballooned to over half a million orders in 2017. Tesla no longer discloses the number of reservations, but many analysts believe those on the list are still waiting for this cheaper version.
The news comes three days after renewed tensions between Musk and U.S. Securities and Exchange Commission. The agency petitioned a judge this week to have Tesla's CEO found in contempt of an October settlement between the parties. The SEC accuses Musk of having made material statements about production levels on Twitter without first having them vetted internally.
That settlement between Musk, Tesla and the SEC concerned Musk's August Twitter post in which he claimed to have "funding secured" to take Tesla private at $420 per share. As part of the settlement, Musk stepped down from his chairmanship role and he and Tesla agreed to pay $20 million each in fines. On Friday, Tesla is due to repay a $920 million convertible bond. Convertible issues give bondholders the right to trade their debt for equity after shares rise over a certain price. Tesla shares are currently about $40 below the $359.87 conversion price.
Tesla had $3.7 billion in cash and cash equivalents at the end of December.