Despite Model X being snazzier than its predecessor Model S, Tesla (NASDAQ:TSLA) has revealed that base Model X will be available for just $80k, which is a mere $5k more than base Model S. Also, the base Model 70D packs impressive specs compared to the high-end 90D which Tesla will sell for $132k. The 70D battery pack will manage to eke 70kWh with a 220-mile range compared to 90kWh and 250-mile driving range for the 90D. Federal tax credits as well as state rebates could lower that cost considerably for buyers. For perspective, Tesla’s older Model S 70D sports a 70kWh battery with a 235-mile driving range.

Falling Battery Prices

When Tesla chief executive Elon Musk launched Model X in September, he said the launch had been delayed by two years because Tesla tried to make it too snazzy. Model X boasts several electric features such as Falcon wing doors and Dual Motor AWD that allows the driver to dynamically shift power from front to rear and vice-versa depending on driving conditions. All other things held constant, the improvements on Model X over Model S would probably have increased costs by around 20k, which in turn would have reflected on the selling price. The fact that the price difference between the two models is so small leads you to suspect that what EV analysts have been saying is true after all–that battery prices have been coming down rapidly.

Battery costs represents the biggest cost component for EVs, and the main reason why your average electric vehicle is much more expensive than a comparable gasoline powered vehicle. But luckily, battery costs have been declining rapidly. When Tesla launched Model S six years ago, EV batteries cost on average $1,000/kWh. Tesla Model S 90D sports a 90kWh battery that would have cost a staggering $90,000 back then. But analysts say that battery costs have fallen to around $400/kWh currently, which implies that the same battery now costs ‘‘just’’ $36,000. Meanwhile, the 70kWh battery that powers Model X 70D probably costs around $28,000. That explains why Tesla has been able to offer a snazzy product at relatively more affordable prices.