Tesla has increased the price of its Model Y in the United States due to rising demand and changes in government regulations making additional versions of the compact SUV eligible for tax breaks, according to the AP report.
(Photo: Sean Gallup/Getty Images)
GRUENHEIDE, GERMANY – MARCH 25: Newly completed Tesla Model Y electric cars are featured in this aerial view on March 25, 2022 near Gruenheide, Germany, at Tesla Gigafactory’s new electric car plant. The new factory, officially named Gigafactory Berlin-Brandenburg, officially opened on March 22 with an event featuring German Chancellor Olaf Scholz and Tesla CEO Elon Musk. The new plant produces both the Model Y and batteries for electric cars.
Model Y’s price increases
According to its website, the EV-maker giant increased prices of the Model Y Long Range version by about 2% to $54,990 and the Performance version by about 2.7% to $57,990.
Three weeks ago, Tesla cut the cost of some Model Y models, the company’s best-selling vehicle, by about 20%.
The price reductions were made to amplify lagging demand and to expand the number of Model Y models eligible for the $7,500 electric vehicle tax credit offered by the Inflation Reduction Act.
The Treasury Department on Friday updated its vehicle classification definitions, allowing more EVs to qualify for the full $7,500 tax credit, including SUVs built by Tesla, General Motors, Ford and many more.
The update came due to automakers lobbying to change car definitions so that more expensive vehicles would qualify for the maximum credit.
Tesla CEO Elon Musk even met with senior advisers to President Joe Biden to talk about the EV market.
Read also: Tesla Q4 2022: Over 405,000 EV deliveries, new record, still not in line with Wall Street expectations
EV tax credit law
Under the law, new electric vehicles, sedans and wagons can only be sold for up to $55,000, while pickups, SUVs and vans with a sticker price of up to $80,000 are eligible for EV tax credits.
The policy had previously raised objections from Tesla and other automakers because it banned some more expensive SUVs, including some versions of the Model Y and GM’s Cadillac Lyriq.
It seems that the price cuts from January were successful. Musk stated on the company’s earnings conference call last week that the company had its largest year-to-date order volume on record.
Ford lowered the price of its Mustang Mach-E in response to Tesla’s price cuts, in part to qualify for the tax credit.
The Inflation Reduction Act passed several amendments, including the EV tax credits. The law aims to increase EV sales as part of a larger initiative to reduce greenhouse gas emissions.
But it’s unclear whether customers can take advantage of the full $7,500 credit for many requirements, such as where to produce vehicles and batteries according to quality, the AP said.
According to the Ministry of Finance, it wants to make it easier for consumers to understand which vehicles are eligible for the credit.
A consumer-oriented fuel efficiency labeling standard will be used instead of the formula established by the Environmental Protection Agency to classify vehicles under the updated rule.
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