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

[SageBrush]

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?

I think that so long as there is demand for a more profitable model that covers their production, that is what Tesla will build.

There is also a numbers game to all this to be aware of: Tesla may not feel obliged to increase profits, but they are constrained in how far they can let profits fall. As in, not much if at all. If Gross profit is 20% and price is $60k, that is $12k per vehicle. A price drop of $6k would require a doubling of sales to keep profits ~ the same. Tesla has been guiding for about 50% CAGR, implying a doubling of production takes about 2 years.

 

[240vPlug]

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.

5 seat optional. Tesla will do what is most financially beneficial to them and their shareholders. Making 7 seat standard or at least available on all models will resolve the issue of the tax credit. I think they should make it standard because otherwise your paying $3,000 to only net a $4,500 credit. Mineral requirements drop the net to only $750 when they go into effect.

Why would Tesla dramatically reduce prices when they have the above option? Unless they aren't able to source the parts for 7 seat configurations.

 

[Geech72]

IF the current interpretation of the tax breaks hold my best guess is that Tesla will bring new product(s) to market. The standard range version of the Y or the much ballyhooed “$25K” Tesla; which they would likely actually price at $32,500 and show you the price after savings on the configurator. However, since Tesla’s leadership is erratic, it’s hard to say what they’ll actually do. They’re having their first investor day in March so we’ll likely hear about their plans then. Of course, as in the past, it will likely include a bunch of bold plans that either never come to fruition or arrive years later than anticipated.

 

[tashtibet]

in 2019 17m cars sold in the US and now down to roughly 13m-the car business is shrinking-so, Tesla demand problem is simply looking through Rabbit hole. While Tesla growth is 40% up from 2021-2022-that's only car business. Remember while back Tesla sold MS with battery capacity lock & unlock after the delivery. Tesla could introduce variety of MY trims-RWD (LFP battery), standard range 4680, buyback 2 xtra seats after the delivery The EV adoption in the US is around 4-5%-people love incentives-Tesla has 2023-2032 to play all kinds of games with the incentives.

 

[SageBrush]

in 2019 17m cars sold in the US and now down to roughly 13m-the car business is shrinking-so, Tesla demand problem is simply looking through Rabbit hole. While Tesla growth is 40% up from 2021-2022-that's only car business. Remember while back Tesla sold MS with battery capacity lock & unlock after the delivery. Tesla could introduce variety of MY trims-RWD (LFP battery), standard range 4680, buyback 2 xtra seats after the delivery The EV adoption in the US is around 4-5%-people love incentives-Tesla has 2023-2032 to play all kinds of games with the incentives.

My bold
Absolutely. E.g., let people unlock range after purchase for an additional cost. That game was already played in Canada from what I remember.
I propose 40 kWh for $4,000. lol

 

[Snow Drift]

The max price is unfortunately determined by the sale price, inclusive of options/accessories. The Model Y 5-Seat has to be way cheaper than $54k to qualify:

$54,999 Max Price for Credit
- $1,200 Destination
- $250 Fee
- $1,000 White Interior
- $1,500 20s
- $2,000 Red paint
$49,049 Max base price

Then take into account UMC, Wall Connector, $6k EAP or $15k FSD.

 

[SageBrush]

The max price is unfortunately determined by the sale price, inclusive of options/accessories. The Model Y 5-Seat has to be way cheaper than $54k to qualify:

$54,999 Max Price for Credit
- $1,200 Destination
- $250 Fee
- $1,000 White Interior
- $1,500 19s
- $2,000 Red paint
$49,049 Max base price

Then take into account UMC, Wall Connector, $6k EAP or $15k FSD.

I don't think delivery is included, and Tesla could (I think) move some of those charges to after purchase options

 

[Snow Drift]

I don't think delivery is included, and Tesla could (I think) move some of those charges to after purchase options

I just read the 12/29 update, you are correct. Dealer installed accessories and Destination are not included.

Q3. How will I know what the manufacturer's suggested retail price (MSRP) is for a vehicle? (added December 29, 2022)​

A3. The MSRP will be on the vehicle information label attached to each vehicle on a dealer's premises. The MSRP for this purpose is the base retail price suggested by the manufacturer, plus the retail price suggested by the manufacturer for each accessory or item of optional equipment physically attached to the vehicle at the time of delivery to the dealer. It does not include destination charges or optional items added by the dealer, or taxes and fees.

Ok, so let's update my math. It is still less than $53-54k:

$54,999 Max Price for Credit
- $1,000 White Interior
- $2,000 Red paint
$51,999 Max base price*

*Assuming all MY are delivered with 19s on their window sticker, and customers can buy 20s on the Shop Tesla website for dealer install.

I can't imagine Tesla saying, well, as long as you get a black interior, and free paint you qualify. That would be so confusing to buyers. So the price needs to come down a lot.

 

[Daekwan]

I think you are on to something here and might see these three versions sold later this year:

• $54,XXX MYSR AWD 5 seater - 4680 battery pack built in Austin (279 mile range). Limited color & wheel options.
• $65,XXX MYLR AWD 7 seater - 2170 battery pack built in Fremont (330 mile range). All color & wheel options.
• $69,XXX MYP AWD 5 seater - 2170 battery pack built in Fremont (303 mile range). All color options.

This fairly simple change allows Tesla to take advantage of the $7,500 IRS credit on its two most popular versions of the Y. It also allows them to do the least amount of retooling at each factory until a newer generation of the Model Y comes along. Teslas gets to continue enjoying its industry-high premiums.. while prices are affordable enough to keep quarterly deliveries from dropping off their current trajectory.

 

[randmness]

I think the MY-SR/LR and MYP will both be under/at $55K (Not far off the 2021 prices and even Dec 2022 prices.) The 7 Seater-Y will be $62500. lol

My second guess is all cars are MYP, and you pay to unlock performance (the return of stealth performances.) Maybe have an option to pay for it upfront, and get the wheels, brakes, spoiler, etc.

 

[Sunshine Speed]

I think you are on to something here and might see these versions sold later this year:

This is my favorite reply so far where you listed specs on 3 versions. Let me slightly update your proposal with my thoughts and 4 versions:
Tesla Model Y in the US, March 2023:

• $50K MYSR RWD 5 seater - LFP battery back (255 mile EPA range). 19in wheels only. Any color except white/gray is $1000.
• $53K MYSR AWD 5 seater - 4680 battery pack (279 mile range). 19in wheels only. White interior $1K extra. Any color except white/gray is $1000.
• $65K MYLR AWD 7 seater - 2170 battery pack (330 mile range). Any color except white/gray is $1000. Bigger wheels cost more.
  • Performance Upgrade $5K more. Comes with faster acceleration, 21-inch wheels, spoiler, lower/stiffer suspension.

Subtract $7500 fed tax credit from all configs above. The first two are under $55K, the LR and Performance have 3 rows (7 seats).
Note that the $50K LFP/single motor config is what Tesla already sells in Europe and Asia today.

 

[voxel]

This is my favorite reply so far where you listed specs on 3 versions. Let me slightly update your proposal with my thoughts and 4 versions:
Tesla Model Y in the US, March 2023:

• $50K MYSR RWD 5 seater - LFP battery back (255 mile EPA range). 19in wheels only. Any color except white/gray is $1000.
• $53K MYSR AWD 5 seater - 4680 battery pack (279 mile range). 19in wheels only. White interior $1K extra. Any color except white/gray is $1000.
• $65K MYLR AWD 7 seater - 2170 battery pack (330 mile range). Any color except white/gray is $1000. Bigger wheels cost more.
  • Performance Upgrade $5K more. Comes with faster acceleration, 21-inch wheels, spoiler, lower/stiffer suspension.

Subtract $7500 fed tax credit from all configs above. The first two are under $55K, the LR and Performance have 3 rows (7 seats).
Note that the $50K LFP/single motor config is what Tesla already sells in Europe and Asia today.

That LFP config is going to get $0 tax credit after March unless a US based battery manufacturer suddenly appears and can supply Tesla with hundred of thousands of cells.

 

[Sunshine Speed]

That LFP config is going to get $0 tax credit after March unless a US based battery manufacturer suddenly appears and can supply Tesla with hundred of thousands of cells.

That's one possible outcome. Another is that they delay several requirements to 2024 or later, enabling cars with battery packs assembled outside North America to quality for $3750 or $7500 during the entire 2023. I predict they will delay requirements, and all EV cars assembled in North America during 2023 with any battery packs from anywhere will collect the full $7500. Just like they're doing right now in Jan/Feb.

 

[SageBrush]

That's one possible outcome.

Let's rephrase that: It is THE outcome as the rules are written.

 

[MacO512]

The max price is unfortunately determined by the sale price, inclusive of options/accessories. The Model Y 5-Seat has to be way cheaper than $54k to qualify:

$54,999 Max Price for Credit
- $1,200 Destination
- $250 Fee
- $1,000 White Interior
- $1,500 20s
- $2,000 Red paint
$49,049 Max base price

Then take into account UMC, Wall Connector, $6k EAP or $15k FSD.

Per the IRS the destination cost is not part of the price cap. Just the MSRP from the factory. Tesla currently ships and invoices the UMC/wall connector separately so those won't be included either.

However people can't finance the items if they aren't part of the purchase agreement.

 

[Snow Drift]

Per the IRS the destination cost is not part of the price cap. Just the MSRP from the factory. Tesla currently ships and invoices the UMC/wall connector separately so those won't be included either.

However people can't finance the items if they aren't part of the purchase agreement.

Agreed. A few posts later I corrected my math to be $51,999 w/ 19s.

 

[Sunshine Speed]

Somebody added [Hypothetical scenario] to the title of my thread. Now that this has actually happened, should "Hypothetical scenario" be removed?

 

[BitJam]

Somebody added [Hypothetical scenario] to the title of my thread. Now that this has actually happened, should "Hypothetical scenario" be removed?

Woot! BTW, this is the price I predicted. It lets people get two options for the long range and still get the tax credit.

 

[vickh]

Seven Seat Interior
$4,000

• • Vehicle Price$56,990
  • Destination fee$1,390
    • Order fee$250
  • Your Model Y$58,630

Excluding taxes & other fees
Your design qualifies for a $7,500 federal tax credit for eligible buyers.
so ~$51k


Glad I waited. Now I have the same dilemma as I had with 3 SR new or Used Model S at the same price

Used Model X are down to $45-50K or 3 row Y. Wish TSLA would sell more used X. Wonder if I should just buy an aftermarket/3rd party warranty for X

 

[Snow Drift]

Welp, there goes my theory. Nice debating guys.