Federal Tax Credit Rules - Will drive Model Y price down to $54,000

[Sunshine Speed]

1) A federal tax credit of $7500 on Model Y is too juicy for Tesla to pass up. Will massively drive up sales if Model Y qualifies.
2) IRS has confirmed that the 5-seater Y does not qualify as SUV because the 5-seater version weighs under 6000 pounds and ground clearance is under 8 inches.
3) Therefore Tesla will now drop the price of Model Y to $54,000 to ensure that it's under $55,000 MSRP limit for non-SUV hatchbacks including paint color choice.
4) Don't believe me? Model Y Long-range was selling for $49,000 in early 2021. So they can DEFINITELY sell it for $54,000, with raw material prices decreasing now. Especially if they can sell the standard-range version instead.

Next steps : Austin Texas factory production ramps up, Model Y inventory keeps increasing, Tesla drops price of Y to $54,000 in March or June.

 

[NeverGoingBack]

Interesting! Hadn’t thought of that scenario. This will be fun to watch!

 

[Tam]

1) A federal tax credit of $7500 on Model Y is too juicy for Tesla to pass up. Will massively drive up sales if Model Y qualifies.
2) IRS has confirmed that the 5-seater Y does not qualify as SUV because the 5-seater version weighs under 6000 pounds and ground clearance is under 8 inches.
3) Therefore Tesla will now drop the price of Model Y to $54,000 to ensure that it's under $55,000 MSRP limit for non-SUV hatchbacks including paint color choice.
4) Don't believe me? Model Y Long-range was selling for $49,000 in early 2021. So they can DEFINITELY sell it for $54,000, with raw material prices decreasing now. Especially if they can sell the standard-range version instead.

Next steps : Austin Texas factory production ramps up, Model Y inventory keeps increasing, Tesla drops price of Y to $54,000 in March or June.

That depends on the demand.
Tesla has consistently said it has no problem with the demand so there's no reason to increase the demand.

 

[Yelobird]

Way too many assumptions here sorry. We can wish but that’s not much more than a hope. If you believe raw goods, labor, parts etc all miraculously decreased your reading a fairy tale. Battery components alone are up 10x. It would great for the consumer yes but not necessarily a must do for Tesla. They sold cars for years with and without tax incentive and did fine.

 

[Sunshine Speed]

That depends on the demand.
Tesla has consistently said it has no problem with the demand so there's no reason to increase the demand.

What if the supply is increasing higher and higher and higher (Fremont+Austin combined, Austin ramping) and the demand is going lower and lower (recession and high interest rates). We have never seen what happens to Tesla demand heading into recession (last one 2008 to 2010). Take a look at Model S and X inventory, it was zero 3 months ago, today stands at 1600 cars they can't sell. Tesla Y from Austin will be selling for $54,000 by June, as they ramp up production and demand goes lower.

 

[Magnus0322]

I think Tesla will do what they did in Canada.

Sell a Model Y LR that is range restricted to 100-150 miles via software for $54-55K and then allow you to unlock the range for $10K after. Customer gets $7500 credit and Tesla gets to sell car for more money in the end

 

[ZenRockGarden]

Yeah, I'd agree that Tesla won't just randomly drop the MYLR price unless they have excess supply.

I do see room for them to offer a MYSR to fill that niche, allowing the MYLR to stay upscale...

But yes, I'd love to see supply-chain improvements allow prices to drop in general, with M3 returning to the 40's and MY in the 50's, and even a future Model 2 hatchbaack in there as a cheap city car in the 200 mile region

 

[bayareaever]

I agree but the problem may be mineral supply requirements, cutting the incentive in half to $3750.

 

[bugek]

Hard to say how much pricing power Tesla has with raw materials. They locked in lithium BEFORE it increased 1200% (not typo) the last 2 years. They just signed a new deal with their supplier, assuming at today's elevated price.

Tesla and Piedmont Lithium amend SC6 supply with multi-year deal

Tesla and Piedmont Lithium have amended their previous lithium supply deal, which will now extend through the end of 2025.

www.teslarati.com

They will either make SR Model Y for 54k with stripped interior (and features?) or make 7 seater the default a few thousand cheaper. If that doesn't work, I can see them chopping prices for the duration of the recession. They could also attempt to keep prices the same but increase range to 400 miles (which might solve the weight restriction for the EV Credit)

 

[ZenRockGarden]

Hard to say how much pricing power Tesla has with raw materials. They locked in lithium BEFORE it increased 1200% (not typo) the last 2 years. They just signed a new deal with their supplier, assuming at today's elevated price.

Tesla and Piedmont Lithium amend SC6 supply with multi-year deal

Tesla and Piedmont Lithium have amended their previous lithium supply deal, which will now extend through the end of 2025.

www.teslarati.com

They will either make SR Model Y for 54k with stripped interior (and features?) or make 7 seater the default a few thousand cheaper. If that doesn't work, I can see them chopping prices for the duration of the recession. They could also attempt to keep prices the same but increase range to 400 miles (which might solve the weight restriction for the EV Credit)

My bet is nothing is done on the MYLR other than trim prices as desired to make demand match supply. They'll let customers order 7 seats if they want. A lot of MYLR and MYP customers earn too much to get any tax credit in the first place.

Meanwhile a MYSR / M3SR offering does make a lot of sense

 

[Sunshine Speed]

The Tesla strategy for 3/Y set by Elon is to go to maximum possible output, and ramp supply as high as possible. Oh Yes, the prices are coming down while the supply goes up. Not sure whether the $54K Model Y will be standard range, or RWD, or both, but it's coming. In 2021 they sold Model Y SR for $42K and Model Y LR AWD for $49K. With production rapidly increasing, do you REALLY think Tesla won't get the price down to $54K for some version of Model Y, making the Y effectively cost $48K after tax credit?

 

[Yelobird]

My guess is they say IF you want the incentive buy the 7 seat upgrade. If you also want the performance, we have a software upgrade for that also.

 

[voxel]

The Tesla strategy for 3/Y set by Elon is to go to maximum possible output, and ramp supply as high as possible. Oh Yes, the prices are coming down while the supply goes up. Not sure whether the $54K Model Y will be standard range, or RWD, or both, but it's coming. In 2021 they sold Model Y SR for $42K and Model Y LR AWD for $49K. With production rapidly increasing, do you REALLY think Tesla won't get the price down to $54K for some version of Model Y, making the Y effectively cost $48K after tax credit?

A $54K Model Y RWD using 4680 cells would make sense. Remove Autopilot or cap acceleration and offer them as a $2K upgrade.

 

[Watts_Up]

I agree but the problem may be mineral supply requirements, cutting the incentive in half to $3750.

So in a couple of months, the 7-seat option will give you only ($3,750 - $3,000) = $750 over ordering directly a 5-seat.

Also I wonder if you order a 7-seat today and get delivered only in April,
then will you still have the $7,000 tax discount or only the updated $3,750 tax discount?

 

[240vPlug]

More likely all model Y will be 7 seat as standard. They would have to drop LR by $11,000 to qualify as is. Standard range, $7,000, and P is $15,000 over.

7 seat option only costs $3,000 and Tesla cost is likely much lower. Bar shortages I think it's obvious Tesla could just make 7 seat standard across the line and leave prices as is.

Everyone else is raising MSRPs even on ICE. Make 7 seat standard and they all qualify so long as you don't add FSD.

 

[Sunshine Speed]

I disagree that there will be any mineral requirements in 2022. Tesla 2170 and 4680 battery packs assembled in USA will get $7500 credit all year and likely next year too.
I disagree that Tesla will focus on the 7-seater to get the tax credit.
It will be a 5-seater Y priced under $55K including paint color option. It could be:
1) Y SR RWD
2) Y SR AWD w/4680
3) Y LR AWD w/2170 (I think this one is the most likely. Maybe no autopilot, or pack limited to 90% or capacity)

 

[Watts_Up]

More likely all model Y will be 7 seat as standard.

Not the best choice for every one:

- The $7,500 tax break will only be available in 2024, not an "over the hood" discount, so you need to advance the amount before getting it back.

- This woud also disadvantage people having less than $7,500 of tax amount, or people with a higher income and who cannot get the tax break.

 

[voxel]

I disagree that there will be any mineral requirements in 2022. Tesla 2170 and 4680 battery packs assembled in USA will get $7500 credit all year and likely next year too.

2022 was so last year

As for battery requirements.. it's two sections: components and minerals. Each worth $3750.

Most think all US carmakers will only get half credit for 2023 but these same carmakers though their cars would be classified as SUVs too

 

[BitJam]

I do see room for them to offer a MYSR to fill that niche, allowing the MYLR to stay upscale...

I agree. I also think the price will be $53K to allow people to select two options. Otherwise there may be a lot of white MYSRs with tow hitches.

It seems bizarre that the IRS waited until now to clarify how EVs will be categorized. Why not give manufacturers as much heads up as possible?

BTW: the base price for my MYLR in the summer of 2021 was only $53.5K. I imagine $53K for a MYSR would be reasonable now to account for inflation. If Tesla can also get some of that battery credit then they should be able to pull this off. The biggest fly in the ointment will be if Tesla can keep up with demand.

 

[SageBrush]

Next steps

You write dogmatically, but Tesla is in a much more flexible situation. If they decide to go for the EV tax credit, they can either offer <some version> of the Model Y that is under $55k, or they can meet the SUV definition by either adding a 3rd row, or by adding active suspension.

^^ This is just simple reasoning. As for which paths Tesla chooses and when -- who knows. It does seem obvious though that if no other considerations dictate, the cost of adding active suspension is less than the price adjustment that would be needed to go under $55k, and it would be added value to the consumer.

^^^ this is what I expect early on. When Tesla is ready to go down-market then <some version> of the Model Y priced under $55k will get built.