Tesla has raised prices on the Model Y in the US, apparently due to rising demand and changes in US government rules that make other versions of small SUVs eligible for tax credits.
The Austin, Texas electric vehicle company bumped the price of the Model Y Long Range version by 2% to $54,990 and the Performance version by 2.7% to $57,990, according to its website. Price does not include shipping and ordering fees.
The move, made Friday, comes three weeks after Tesla slashed prices by nearly 20% on some versions of the Model Y, the company’s best-selling vehicle. The price cut was made to boost declining demand, and also to make more versions of the Model Y eligible for the $7,500 electric vehicle tax credit under the Inflation Reduction Act. The full tax credit will be available at least until March.
On Friday, the Treasury Department revised the definition of vehicle classification to make more EVs — including SUVs made by Tesla, Ford and General Motors — eligible for $7,500.
The change comes after lobbying by automakers who pressured the Biden administration to change the definition of vehicle so that higher-priced vehicles can get the maximum credit. Tesla CEO Elon Musk met with President Joe Biden’s top aide last week to discuss the EV industry and its broader electrification goals.
Under legislation approved last summer, pickup trucks, SUVs and vans with sticker prices up to $80,000 are eligible for EV tax credits, while new electric cars, sedans and wagons can only cost up to $55,000. The rule invalidates some higher-priced SUVs, such as GM’s Cadillac Lyriq and some versions of the Model Y, prompting complaints from Tesla and other automakers.
The January price cut seems to be working. In Tesla’s earnings conference call last week, CEO Elon Musk said that so far in January the company has seen the strongest number of orders in the company’s history. He also said the company has raised the price of the Model Y “a little bit in response.”
After Tesla’s price cut, Ford responded by slashing the price of the Mustang Mach-E, partly to get a tax credit and also to attract buyer interest. But crosstown rival General Motors says it has no plans to lower EV prices.
The EV tax credit is among various changes made to the Inflation Reduction Act, which Congress approved in August with only a Democratic vote. The law is designed to spur EV sales as part of a broader effort to reduce emissions of planet-warming greenhouse gases.
But the web’s complex requirements, including where the vehicle and battery must be manufactured to qualify, have cast doubt on whether buyers can receive the full $7,500 credit.
The Ministry of Finance said that there is hope to make it easier for consumers to know which vehicles are eligible for credit. Under the revised rules, vehicle classification will be determined by consumer-facing fuel economy label standards, rather than a more complex formula set by the Environmental Protection Agency, the Treasury said.
A message was left Saturday seeking comment from Tesla on the price increase. The increase was reported on Friday by Bloomberg News.
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