Tesla Drops Price of Model S and Model X by $5,000 as Biden’s New EV Tax Credit Rules Kick In
Written by
Yaël Bizouati-Kennedy
Edited by
Nicholas Morine
Commitment to Our Readers
GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.
20 Years
Helping You Live Richer
Reviewed
by Experts
Trusted by
Millions of Readers
In January, Tesla cut its car prices in the U.S. and Europe by up to a whopping 20% on certain models. Now, it once again slashed prices, following the Biden administration’s new guidance on which electric vehicles (EVs) are eligible for tax credits.
Tesla cut $5,000 off both the Model S and Model X, according to Business Insider, meanwhile, it also cut the price of the Model 3 sedan by $1,000 and the Model Y by $2,000.
EV Tax Credit Change Occurs April 18
At the tail end of March, the Biden administration released details surrounding the new tax credit structure pertaining to the purchase of EVs.
As Insider detailed: “Starting on April 18, the EV tax credit will be split into two halves. A model will be eligible for $3,750 of incentives if at least 40% of its battery minerals (determined by value) were extracted or processed in the US (or obtained through a country the US has a free trade agreement with). The other $3,750 comes into play if at least 50% of the value of a vehicle’s battery components comes from North America. Those percentage requirements will increase in the years following.”
Another reason why some Tesla EVs can now qualify for the tax breaks is that, thanks to the continuing price cuts, they no longer exceed the price cap requirement. The price cap is $80,000 for vans, sport utility vehicles and pickup trucks, and $55,000 for other vehicles.
Analyst Insight: Tesla’s Fortunes May Improve With Price Cut
Wedbush Securities analyst Dan Ives wrote in a Jan. 13 note that the company, which “just announced on its website some significant price cuts in the U.S. and Europe ranging from 6% to 20% sticker reductions for Model 3/Y and various performance models,” has “margin flexibility to make aggressive moves like this to gain further market share in this EV arms race.”
“We also note that Model Y will benefit from EV tax credits likely in 2023 now with these cuts which should be a further tailwind,” Ives wrote, adding that these price cuts could spur demand and deliveries by 12%-15% globally in 2023.
There are also additional new features of the tax credits that are enabling some carmakers — such as Tesla — to again be eligible for tax incentives. Under the new law, the cap halting tax credits after 200,000 vehicles were sold has also been removed.
More From GOBankingRates
