Tesla drops Model Y starting price below the average U.S. vehicle

Tesla Inc. is now charging less for the cheapest version of the Model Y crossover than what the typical new vehicle sells for in the U.S., a threshold Elon Musk crossed in blazing fashion.

At $46,990, the base Model Y now costs $759 less than the average amount paid for a car or truck in the U.S. The differential between these figures has changed by more than $20,000 since the middle of last year.

No carmaker has made such a dramatic reduction to a high-volume vehicle in the modern age of the automobile. The Model Y was the best-selling EV in the U.S. last year, and one of the top crossovers of any type.

While Musk has denied that Tesla is starting a price war, his peers see it differently. Ford Motor Co. CEO Jim Farley, whose Mustang Mach-E SUV lost considerable share to the Model Y last quarter — despite some discounting — said last week that price battles are “breaking out everywhere.”

Indeed, Tesla has been slashing prices beyond America’s borders. French carmaker Renault SA last week called Tesla’s cuts a challenge and said it was examining its pricing strategy in response. In China, automakers have followed Tesla with steep discounts, and at least one analyst has warned some companies might not survive the price war.

Morgan Stanley analyst Adam Jonas said last week that Musk’s U.S. cuts are so aggressive, they may lead some automakers to slow down their breakneck pace of investment in electric vehicles and rather than compete with Tesla on price in uncertain economy.

“We are questioning whether this is the ‘moment’ where the boards of the legacy OEMs can reconsider dialing back the magnitude and timing of their EV capex and R&D plans,” Jonas said.