Cutting prices for Tesla's Model 3 may undermine profitability push

Tesla is less than half a year away from offering a cheaper version of its mass-market Model 3, according to founder Elon Musk, a move that could erode margins as the electric carmaker tries to show investors it can deliver sustained profits after years of losses.

Maintaining the current price carries risks of its own, however, since a $7,500 federal tax credit for customers who purchase electric vehicles is phasing out, potentially undercutting demand. The credit decreases after a manufacturer sells 200,000 cars, a milestone that Tesla reached earlier this year. Starting on Jan. 1, it will lower to $3,750, then to $1,875 on July 1.