Model Y cars are pictured during the opening ceremony of the new Tesla Gigafactory for electric cars on March 22, 2022 in Gruneheide, Germany.
Patrick Ploo | pool | via Reuters
Tesla has hiked prices on its Model Y in the US, apparently due to increased demand and changes in US government regulations to make more versions of the small SUV eligible for tax credits.
The Austin, Texas, electric vehicle company raised the price of the Model Y Long Range Edition by about 2% to $54,990 and the Performance Edition by about 2.7% to $57,990, according to its website. Prices do not include shipping and ordering charges.
The moves on Friday come three weeks after Tesla cut prices by nearly 20% on some versions of the Model Y, the company’s best-selling vehicle. The price cuts were done to boost sagging demand, and also to make more versions of the Model Y eligible for the $7,500 electric-vehicle tax credit in the Inflation Reduction Act. The full tax credit will be available through at least March.
On Friday, the Treasury Department revised vehicle classification definitions to allow more EVs — including SUVs made by Tesla, ford And General Motors — Eligible for the full $7,500.
The change came after lobbying by automakers, which had pressed the Biden administration to change the definition of a vehicle to allow higher-priced vehicles to qualify for the maximum credit. Tesla CEO Elon Musk met with top aides to President Joe Biden last week to discuss the EV industry and broader goals for electrification.
Under the sweeping legislation approved last summer, pickup trucks, SUVs and vans with a value of up to $80,000 qualify for the EV tax credit, while new electric cars, sedans and wagons can only cost up to $55,000. The rule disqualified some high-priced SUVs, such as GM’s Cadillac Lyric and some versions of the Model Y, prompting complaints from Tesla and other automakers.
The January price cut apparently worked. On Tesla’s earnings conference call last week, CEO Elon Musk said that so far in January the company has seen the strongest year-over-year number of orders in the company’s history. He also said that the company had raised the price of the Model Y “in response to that a little bit”.
After Tesla cut prices, Ford reacted by slashing the price of its Mustang Mach-E, to qualify for tax credits and increase buyer interest. But crosstown rival General Motors said it has no plans to cut EV prices.
The EV tax credits are among the changes implemented in the Inflation Reduction Act, which Congress approved in August with only Democratic votes. The law is designed to encourage EV sales as part of a broader effort to reduce planet-warming greenhouse gas emissions.
But a complex web of requirements, including vehicles and batteries that must be manufactured in order to qualify, has cast doubt on whether buyers can receive the full $7,500 credit.
The Treasury Department said Friday that it hopes to make it easier for consumers to know which vehicles qualify for the credit. Treasury said that under the revised rule, vehicle classification would be determined by a consumer-facing fuel economy labeling standard, rather than a more complex formula set by the Environmental Protection Agency.
A message was left on Saturday seeking comment from Tesla on the price hike. The increase was reported Friday night by Bloomberg News.
