I probably ought to clarify my last post.
First, I don't think the price drop is overall good news. If demand was stronger, Tesla wouldn't have needed to drop the price and they could sell all the cars they produce and make better margins and more profit, especially in this very important Q1 quarter.
On the other hand, there are some positives. Most notably, Tesla wouldn't have dropped the price unless they were able to do so while still achieving decent margins. So, it does show in some regard cost efficiency improvements they are likely making. However, usually it's not that straightforward, and in this case I think it's a bit of both. Soft U.S. demand after the expiring full federal tax credit, weak seasonal Jan/Feb sales, delay in SR Model 3... combined with Tesla's ability to increase their gross margin on the Model 3s that they are producing.
I think Tesla's goal is not to "increase" demand per se with this price drop, but rather they just want to be able to sell all the cars they produce this quarter... and by dropping the price, this does get some more people to buy the Model 3 and will help Q1 revenue.
On a bigger picture note, I do think that the bulk of Model 3 demand will be in the $35k-45k price range, and Tesla doesn't offer the low-end yet and is missing out on a lot of potential buyers. So, in this regard, it's a tricky time to navigate for Tesla. They need to quickly offer the $35k SR Model 3, but they're not able to do so immediately. But they're needing to keep demand up to sell all the cars the produce, especially until they can get the SR Model 3 out which will hopefully shore up demand.
I think we'll be debating/arguing about "demand" for Model 3 for the next few years, just like folks here did with the Model S and X. However, in the end, it's quite possible that Model 3 demand might not be as high as Elon has predicted. I personally think a lot of it depends on range. A SR Model 3 at 220 miles just isn't enough range for most to get super excited about an EV. If the $35k Model 3 had 300 miles, then that would be a different story. In other words, if Tesla sold a $35k Model 3 that got 300 miles range (or even 270 miles), then I think demand would be as high, if not higher than Elon estimates. But that is going to take time for Tesla to get there.