Beginning on Monday, Tesla will no longer offer the cheapest variant of its Model S sedan and Model X SUV. CEO Elon Musk confirmed on Twitter that the automaker has decided to do away with its lowest range offerings, leaving only one battery option in place for future buyers.
Specifically, Tesla will be limiting buyers who purchase the Model S and X to only configure the vehicle with a 100 kilowatt-hour battery pack, removing the previously offered 75 kWh option. The smaller battery provided up to 259 miles of range on the S and 237 miles on the slightly bulkier X whereas the 100 kWh battery offers a beefier 335 and 295 miles of range, respectively.
The largest impact customers will notice, aside from range, is in their wallet. With Tesla is eliminating its lowest range trims, the entry point for purchasing a Model S and Model X will now approach $100,000. The cheapest Model S will now increase from $76,000 to $94,000 and the Model X from $82,000 to $97,000.
In additional to the inexpensive trims being discontinued, Tesla customers now face a significantly decreased federal tax credit for purchasing the vehicles. On January 1st, the U.S. government slashed Tesla's $7,500 incentive in half, meaning new buyers will only be able to claim a benefit of $3,750. The automaker responded by slashing prices of all models by $2,000.
A price increase of this magnitude significantly widens the price gap between the Model 3, Tesla's entry-level premium sedan, and its flagship luxury-class Model S and Model X vehicles. Prior to the change, buyers who were considering the purchase of a fully equipped Model 3 Performance at $70,500 may have had trouble deciding between the Model 3 and with the 75 kWh Model S. Widening the gap effectively removes the teetering by raising the price point between the vehicles from $6,500 to $23,500.
This move also opens the question of what to expect of the mid-range Model 3 once Tesla releases its $35,000 standard range variant. Currently, the automaker offers both a long-range and mid-range battery for the Model 3. During Tesla's Q3 2018 quarterly earnings call, Musk admitted that the automaker could not produce the Model 3 at the promised $35,000 price point at that particular time. Instead, it would need up to six months to find a way to make the price point profitable. As a stepping stone, Tesla released the mid-range battery for customers who wanted a more cost-effective Model 3 and didn't need the range of the more expensive trims.
Musk later went on to assure Twitter followers not to expect a phaseout of the Model S or Model X anytime soon but did not provide an official reasoning behind discontinuing the 75 kWh trims.