Tesla’s Model 3 will be its most important car as it will make it a mass market producer. The company will start taking preorders for its $35,000 car next month, but the car may eventually cost buyers much less – something around $25,000.

Tesla Model 3 Price: $35,000 or $25,000?

Tax credits to lower Model 3 cost

Tesla told consumers and investors previously that the $35,000 price tag of the car excludes significant federal and state incentives for electric cars. A Tesla spokeswoman also confirmed to Bloomberg that the price of the car is “$35,000 before incentives. We haven’t changed our minds.”

Federal tax incentives can take away almost as $10,000 from the cost of purchase, thereby expanding the market for the Model 3. Incentives for electric cars vary from state to state, but a $7,500 federal income tax credit is available to all.

Drop in price equals more market

When it comes to a car, price plays a very important role. According to Salim Morsy of Bloomberg New Energy Finance, on an average, a new car costs about $31,000. All market vehicles above this price level are trucks or SUVs. In comparison to the Model 3, the BMW 3 Series is the only the car in the segment that carries a $35,000 price tag and gets more than 100,000 in annual sales.

Morsy believes a drop in the Model 3 price from $35,000 would help expand the market by roughly 50%. In addition, incentives from state governments could further bring down the price of the car, for instance, $6,000 in Colorado and $2,500 in California, Massachusetts, and Tennessee.

Will Tesla delay Model 3 too?

Whether or not any buyer will get the Model 3 at $25,000 will depend majorly on Tesla’s ability to bring the car to the market in time. The automaker has been known for years-long delays for new vehicles, right from its first car the Roadster to the most recent Model X. Adam Jonas of Morgan Stanley believes Tesla won’t be able to bring the Model 3 to the streets until late 2018. Also Tesla’s ability to crank out cars is seen as the only limiting factor in this price range, says Bloomberg.

On Tuesday, Tesla shares closed up 0.18% to $148.25. Year to date, the stock is down by over 38%, while in the last year, it is down by almost 32%.