Tesla's Model Y is now available for a starting price of $46,990. It prices the EV lower than the average cost of a new vehicle in the US by $759. 

This is the fifth price cut made by Tesla in 12 months. And reduces prices by almost a third for its top-selling model in the country. 

The billionaire CEO of Tesla, Elon Musk is determined to capture a greater share of the SUV market in the US. And he’s willing to make history to achieve his goal.

The Austin, Texas, company has reduced prices by almost a third for its top-selling model in the country. 

After all the price cuts, Tesla raised the cost overnight on its slower selling more expensive models. And it added $2,500 to all four versions of Models S and X, reflecting an increase in their prices from 2.4% to 2.9%.

The rise in price is an effort to appease investors, who were frightened on Thursday after earnings and profit margins took a sharp decline due to the price cuts.

This significant price drop makes the Model Y the most affordable option in the electric SUV market, further positioning Tesla's EVs against mass-market brands. The price difference between the cheapest Model Y and the average cost of a new car or truck in the US has changed by over $20,000 since mid-2022. 

Tesla's Model Y makes history

No other automaker has ever made such a dramatic reduction in price for a high-volume vehicle in modern automotive history.

The Model Y was the best-selling electric vehicle in the US last year. And remains one of the top-selling SUVs overall. 

Ford Motor Co. CEO Jim Farley said that price wars are "breaking out everywhere," even though Musk denies that Tesla is initiating one.

Farley’s Mustang Mach-E SUV, was heavily discounted last quarter, and lost significant market share to the Model Y. Tesla has been reducing prices globally, with French carmaker Renault SA considering it a challenge and examining its pricing strategy in response. 

Automakers in China have also followed Tesla with steep discounts, and an analyst has warned that some companies may not survive.

Musk's aggressive price cuts may lead other automakers to reconsider their investment in electric vehicles, slowing down their pace of research and development. Morgan Stanley analyst Adam Jonas stated last week that legacy automakers might need to strategize a response to Tesla’s aggressive moves.

 “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.

Tesla's latest round of price cuts has positioned the Model Y SUV as the most affordable electric SUV on the market. And the goal of capturing a greater share of the SUV market in the US may be within reach.  

While Musk has denied initiating a price war, other automakers have followed Tesla with steep discounts globally.