Tesla offers rare year-end discounts on 2 top-selling models

DETROIT (AP) — Tesla Inc. is offering rare discounts through year's end on its two top-selling models, an indication that demand is slowing for its electric vehicles.

The Austin, Texas, company started offering a $3,750 incentive on its Model 3 sedan and Model Y SUV on its website earlier this month, but on Wednesday doubled the discount to $7,500 for those who take delivery between now and Dec. 31.

The move comes ahead of a new federal tax credit of up to $7,500 that's scheduled to take effect Jan. 1. Teslas weren't eligible for a previous federal tax credit program because the company had reached a limit of 200,000 vehicles sold. Next year's credits don't have such a limit.

“This is a sign of demand cracks and not a good sign for Tesla heading into the December year-end,” Wedbush analyst Dan Ives said in an e-mail. “EV competition is increasing across the board, and Tesla is seeing some demand headwinds."

Lower priced versions of the Models 3 and Y will be eligible for the federal tax credit come January due to limits on vehicle purchase prices outlined in the Inflation Reduction Act.

Without the discounts, the Model 3 starts at just over $48,000 including shipping, while the Y has a starting price of just over $67,000. To be eligible for the federal tax credit, vehicles can't have a sticker price of over $55,000 for sedans and $80,000 for trucks and SUVs.

In a regulatory quirk, many vehicles like Teslas that are made in North America likely will be eligible for the full $7,500 tax credit from January into March because the Treasury Department is still working on rules requiring battery minerals and parts to come from North America. It’s likely that most of the vehicles will only be eligible for half the credit once the rules come out in March.

Tesla may be...