Tesla drops price of Model S/X, Model X now qualifies for US tax credit

Tesla has cut prices on the Model S and X, with price drops of 15-19% in the US on all trim levels (and similar cuts in the rest of the world), except for the brand-new Standard Range model which was introduced just over two weeks ago and is now no longer available.

Good news and bad news from Tesla today – the cheapest Model S and Model X, the $78,490/$88,490 Standard Range version, is gone. We hardly knew ye.

But that model has been replaced with price cuts across all the rest of Tesla’s S and X range, leading today’s base price of the larger-battery versions of both cars to be cheaper than yesterday’s base price of the smaller-battery versions.

And so, today you can get a Model S for a base price of $74,990, $3,500 less than yesterday’s lowest price, or a Model X for $79,990, $8,500 less than yesterday:

Beyond that, today’s “base model” now has the larger battery, with an estimated EPA range of 405 miles for the S and 348 miles for the X. Yesterday’s base model was the software-limited Standard Range, with 320/269 miles of range for S and X respectively. Although, do note that Tesla is prone to overstating its range numbers, and these cars actually haven’t changed hardware-wise, as the SR model had the same battery, just locked behind software.

But wait, there’s more! Due to a quirk in how the US Federal EV Tax Credit works, the Model X can now actually be cheaper than the Model S after incentives – at least in its absolute base trim.

The Inflation Reduction Act set MSRP caps on what vehicles can qualify for the $7,500 tax credit, with a threshold of $55k for cars and $80k for trucks and SUVs. Prior to now, the Model S and X were both above that cap, and the S is still above the car cap, but the X is now below the SUV cap. This means that certain buyers (who do not run afoul of the the IRA’s income caps of 150k single/300k married filing jointly) can actually get an X for less than an S, as long as they buy a bone-stock X with no options attached from the factory.

Tesla says that a reduction in credit availability is likely to happen at the end of this year, because the credit has stricter requirements that go into place at the end of each year. But we won’t know for certain about that until the time comes.

On the other end of the price spectrum, Plaid versions of both vehicles have dropped in price as well, from $108,490 yesterday to $89,990 today.

And in the rest of the world, prices have dropped as well. Across Europe and in China, prices are down on both models in similar amounts as in the US (though not in right-hand drive countries, as the two models aren’t available in RHD).

City Dwellers’s Take

Every time we think we’ve seen an end to Tesla’s price drops, it throws another one at us.

The company has massively slashed prices of vehicles multiple times this year, and then gained access to the full IRA tax credit on its cheapest Model 3, making the car quite a deal. It also cut the price of FSD by $3k just tonight.

Some of these price cuts have made some recent customers angry at the sudden drops in residual value for their vehicles, but has overall benefitted the consumer, as lower prices are generally a good thing.

It has also started a bit of a price war in electric cars, with some other companies dropping prices, or announcing lower-priced models, likely in response to Tesla finally bringing prices back down after raising them so many times over the course of the previous couple years.

We think there are a couple specific things that influenced today’s price drops.

One, the Inflation Reduction Act’s MSRP cap of $80k likely looked like a juicy target for Tesla, and getting the Model X down to that price means knocking another $7,500 off the final cost of the vehicle for some consumers. So, thanks to Joe Biden for that one.

Two, Tesla just unveiled the “Project Highland” Model 3 Refresh, which has a lot of improvements we didn’t expect – and some of which were previously exclusive to the Model S and X, like a rear touchscreen. This could give customers fewer reasons to consider a Model S over a Model 3, and so lowering the price of the Model S could be one way to ensure that there’s still some increased value proposition there on Tesla’s higher-end sedan.