Tesla's Model 3 now costs less than the average new car
Tesla
For years, auto investors have placed bets on when electric cars would reach price parity with their combustion counterparts. With Tesla's recent price cuts and government incentives, the company has now achieved this milestone for the Model 3. A Model 3 is now less than the average price of a new car, making it a more affordable alternative for drivers looking to transition to electric or upgrade their vehicle.
The Price Gap Between EVs and Gas Cars
According to Bloomberg's analysis, the price gap between the Model 3 and the average new vehicle sold in the US has never been wider. A Model 3 is now $4,930 less than the average price of a new car. Without credits or fuel savings, the sticker price ($42,999 USD) now sits $800 below the cheapest BMW 3 Series, one of its closest competitors.
While Tesla is reducing the price tag, the cost of gasoline-fueled cars has gone in the opposite direction. The average cost of a new vehicle has risen more than $10,000 since the beginning of the pandemic, reaching $47,920 in January. This rise is driven by a shortage of computer chips, raw material inflation, and car manufacturers' decisions to keep inventories low and prices high while investing heavily in developing electric cars.
Expanding EV Market
Tesla's price cuts have sparked a ripple effect among other automakers. Ford has slashed the price of its electric Mustang Mach-E, while Lucid Group offered $7,500 discounts, and Rivian Automotive announced layoffs. In addition, General Motors is slated to launch electric versions of its Chevrolet Blazer and Equinox SUVs later this year, right in the middle of America's first-ever EV price war. Meanwhile, the Model Y has also seen a substantial price cut of $13,000 earlier this year, making it the third-best-selling SUV in the US, behind the Toyota RAV4 and Honda CR-V.
Affordability Driving EV Adoption
That price tag may decrease even further when the refreshed Model 3 appears. Reuters reported that Project Highland would go into production in Shanghai in September. The goal of the refreshed Model 3 is to increase efficiency and cut production costs. We already know Tesla is eliminating the wood trim in the updated version, a cost-saving and environmentally friendly move. While the changes could bring the price down, it is worth noting that when Tesla refreshed the Model S and Model X, the prices jumped by 12% and 15%.
The increasing affordability of Tesla's vehicles may drive the adoption of electric cars and contribute to the growth of the EV market. If Tesla can continue to offer price cuts, it could attract more new buyers as the company ramps up production at its new plants in Austin, Texas, and near Berlin, while expanding capacity in Shanghai. There's never been a better time to buy a Tesla.
In an updated filing to the US Department of Energy, the Cybertruck is now eligible for the $7,500 USD EV tax rebate. However, what’s most interesting is that this same filing also confirmed the upcoming production of the Single Motor Rear Wheel Drive - for model year 2025.
Rear Wheel Drive
The Rear Wheel Drive Cybertruck was initially announced at the original Cybertruck reveal, but when the Foundation Series was announced, only the Tri-motor Cyberbeast and Dual Motor AWD models were made available. Tesla initially indicated that the RWD model would arrive sometime in 2025, but that text was later removed from the website.
In the second half of 2024, Tesla launched the non-Foundation series, but it once again arrived without mention of the RWD variant. Many have expressed a great amount of interest in the RWD variant, especially given the higher-than-expected pricing of the Cybertruck at launch.
Cybertruck EV Rebate
In addition to the reveal of the 2025 RWD variant, the Cybertruck is now also eligible for the US Federal EV Tax Rebate. For buyers of the vehicle, that means the AWD Cybertruck is now eligible for the full rebate if you don’t add any additional options since it needs to stay under the $80,000 cap.
FSD can still be added for $8,000 since it’s not considered a vehicle add-on and won’t count toward the total price of the truck. The incoming US Administration has already said it intends to cancel the US Federal EV Tax Rebate sometime in late January, so if you’ve been on the fence, this may be a good opportunity to buy the truck.
Here’s an updated price table for the Cybertruck, which includes pricing with and without the rebate for all three variants.
Variant
Price
After Rebate
RWD*
$60,990
$53,490
AWD
$79,990
$72,490
Cyberbeast
$99,990
Not Eligible
*RWD price has not been confirmed at this point.
The price for the RWD Cybertruck above is the price Tesla showed on their site before it was removed in August 2024.
If you use a referral code alongside the tax rebate, the AWD starts at $71,490. Some lease incentives can also drive that price down slightly if you choose a lease and then do a lease buyout at the end.
A couple of weeks ago, Ashok Elluswamy, Tesla’s VP of AI, announced that Tesla would finally roll out an FSD update for vehicles with Hardware 3. Earlier this week, on December 30th, Tesla did just that and started a public rollout of FSD V12.6.
Since the initial rollout, the update has gone out in several other waves, but they’ve been extremely small. Thanks to several users, we know have our first look at FSD V12.6 and how it compares to the previous FSD version and to the latest version for Hardware 4 vehicles — FSD V13.2.2.1.
How FSD V12.6 Compares to 12.5.4.2
Vehicles receiving the FSD V12.6 update are coming from Tesla’s Holiday update, version 2024.44.25.2, which includes FSD V12.5.4.2.
While FSD V12.5 was a big step up from FSD V12.3.6 for most users, it did include its share of issues. The big two have been lane selection and behavior at traffic lights.
While the release notes for FSD V12.6 highlight features such as End-to-End on Highway, Improved City Streets Behavior, and Smoother and More Accurate Tracking, FSD V12.6 is noticeably smoother and more capable. It now handles turns and scenarios that it struggled with or simply couldn’t perform on FSD V12.5.
How it Compares to FSD V13
One of the key features of FSD V12.6 is a redesigned controller for smoother and more accurate tracking. This feature actually comes from FSD V13, so users should think of FSD 12.6 as a hybrid between FSD V12 and FSD V13. In fact, it seems like Tesla considered calling this version V13, but more on this later.
The controller referenced in the release notes is responsible for tracking objects around the vehicle. The vehicle can only drive as well as it can see, so the improved tracking accuracy directly improves FSD decision-making, leading to smoother driving. This is very evident in FSD V12.6, which now delivers a level of smoothness comparable to what users are experiencing in FSD V13.
Thanks to Rhys Samson, who has both FSD V12.6 and FSD 13.2, they directly compare the two versions and say that FSD V12.6 now operates as smoothly and confidently as his Cybertruck on FSD V13.2.
In their eyes, FSD 12.6 has done a lot to reduce, if not eliminate, the anxiety of not having AI4/HW4 in their Model S. This may change as AI4 vehicles continue to receive improvements while HW3 vehicles are expected to lag in FSD updates, but FSD V12.6 is a big step forward and could have arguably been called FSD V13.
Which Vehicles are Receiving V12.6
Right now, FSD V12.6 is only rolling out to Model S and Model X vehicles with Hardware 3. So far this has only been “refreshed” models, so it doesn’t include Model S/X cars prior to 2021. When the update was released on December 30th, Ashok Elluswamy stated that the update would be available for “other platforms,” presumably the Model 3 and Model Y, within a week. This puts us at around January 6th for other models. Ashok’s timelines have been extremely accurate and we believe Tesla will deliver this update sometime next week.
The Model 3 and Model Y are expected to be supported, but it’s not clear whether it’ll also include legacy Model S/X vehicles as well.
We expect this release to eventually become available for everyone soon, the only question would be whether it’d become available for legacy S/X vehicles with MCU 1. While the upgrade to MCU 2 isn’t cheap, any owners with an MCU 1 vehicle and HW3 would receive a much more capable vehicle by upgrading to the newer infotainment unit.
What About FSD V13 for HW3?
Rhys Samson
While we expected Tesla to release an FSD update for HW3 vehicles with the new end-to-end highway stack, FSD V13 was more of a wildcard. Would Tesla wait to upgrade HW3 vehicles with newer hardware or spend the time creating a smaller V13 model for HW3 vehicles?
Due to a small bug, it looks like we may have some insight into this question. Users who have installed FSD V12.6 will notice that while the release notes and the vehicle will call update 2024.45.25.10 FSD V12.6, the version shown in the app is actually quite different.
At the bottom of the main screen in the Tesla app, Tesla will show several bits of information, including your vehicle’s software version and the FSD version. While the vehicle software is correctly labeled as 2024.45.25.10, the FSD version actually mentions an unreleased FSD version — v13.2.3.
While this could simply be a bug or a typo, it could also be an indication that Tesla was considering calling this release FSD V13.2.3 and that it may have been a last-minute decision. While this may not mean much, it could be a sign that is already thinking about or developing FSD V13 for HW3 vehicles.
Keep in mind that many features for FSD V13 take advantage of the more powerful hardware, such as larger AI models and improved video feeds. However, other features could potentially be carried over to HW3.
Roll Out
While FSD V12.6 is still only available for the Model S and Model X, it continues to go out in increasingly larger waves. The last wave occurred overnight, and there’s a possibility of us seeing more today. Given the continued waves, it looks like everything is on track for a release to other models this weekend or early next week.
You can keep an eye out on our statistics page to track additional roll outs, and we’ll be sure to cover the release when it becomes available to more vehicles.
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