US authorities have been phasing out tax credit for Tesla cars since the beginning of January, effectively raising the purchase price of its cars by US$3,750.
The electric carmaker initially responded by trimming its prices by US$2,000, but it said on Wednesday that it had shaved off another US$1,100.
Even with the latest cuts, the cheapest Model 3 will still set customers back US$42,900 and Tesla has been ramping up production and cutting costs as it looks to get the starting price below the US$35,000 target Elon Musk had originally promised.
It said it was able to fund the most recent price cuts by ending a costly referral programme which gave new buyers six months of free charging and prizes for existing owners.
Musk recently posted on Twitter, saying that his company, which is worth US$55bn, is “doing everything [it] can” to lower prices.
Last month, Tesla posted only its fourth-ever profitable quarter despite delivering slightly fewer Model 3s than Wall Street analysts had been expecting.
The California-based company’s stock was down 0.7% to US$321.35 in pre-market trading in New York on Wednesday.