Tesla Slashes Prices for Third Time in 12 Months as Sales Slide Persists
Tesla has cut Model Y and Model 3 prices for the third time since early 2025, with the Model Y Long Range now starting at $42,990. The cuts come as Tesla battles slowing demand and intensifying competition.
Tesla has reduced prices on its Model Y and Model 3 lineup for the third time in 12 months, the company confirmed on February 10, 2026. The Model Y Long Range now starts at $42,990 (before destination charges), down from $47,990 at the start of 2025 — a $5,000 reduction in a single year that reflects the intensifying pressure on the company’s pricing power.
The New Pricing
| Model | Previous Price | New Price | Change |
|---|---|---|---|
| Model 3 RWD | 38990 | 36990 | -$2,000 |
| Model 3 Long Range AWD | 45990 | 43990 | -$2,000 |
| Model 3 Performance | 52490 | 50990 | -$1,500 |
| Model Y Long Range AWD | 44990 | 42990 | -$2,000 |
| Model Y Performance AWD | 52490 | 50990 | -$1,500 |
The Cybertruck, which launched in late 2023, has not seen price adjustments in this round.
Why Tesla Is Cutting Prices
Tesla’s persistent price cuts reflect a fundamental challenge: the company is caught between declining demand and a competitive environment that is more intense than at any point in its history. Five years ago, the Model Y competed primarily with legacy ICE vehicles and a handful of underwhelming EVs from established automakers. Today it competes directly with the Hyundai IONIQ 5, Kia EV6, Ford Mustang Mach-E, and the incoming Rivian R2 — all of which are genuinely good vehicles with competitive pricing.
Tesla’s U.S. sales fell for a second consecutive year in 2025, declining 8 percent versus 2024. The company has acknowledged that CEO Elon Musk’s political activities have alienated some buyers, but the more structural issue is that the competitive set has improved dramatically.
Impact on Tesla’s Margins
Tesla’s automotive gross margin — which peaked at 32.9 percent in Q1 2022 — was 16.3 percent in Q4 2025, the lowest since Q4 2019. Each price cut compresses margins further. At $42,990 for the Model Y Long Range, Tesla is pricing the vehicle below where most analysts believe its current cost structure supports positive gross margin.
The company’s argument is that volume growth and software revenue (FSD subscriptions, premium connectivity) will compensate for margin compression. That argument has been credible for the past two years; it’s becoming harder to sustain as the growth rates slow.
What This Means for Buyers
For buyers in the market for an EV, Tesla’s price cuts are good news. The Model Y Long Range at $42,990, with 330 miles of EPA-rated range and access to the Supercharger network, is genuinely competitive on a spec-for-spec basis with the IONIQ 5 and Mach-E.
The risk for Tesla buyers is depreciation. A vehicle that costs $42,990 today could be worth $35,000 in two years if Tesla continues to cut prices to stimulate demand. Buying a Tesla has always involved accepting significant price risk — you never know when the next price cut will reduce your vehicle’s resale value.
For more on Tesla’s strategy and challenges, see our Tesla brand reputation analysis.
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