Tesla raises Model Y price after US changes tax credit rule

DETROIT — Tesla has raised prices for its Model Y in the United States, reportedly due to growing demand and changes in US government rules that make more versions of the small SUV eligible for tax credits.

The Austin, Texas-based electric vehicle company raised the price of the Model Y Long Range version by about 2% to $54,990 and the Performance version by about 2.7% to $57,990, according to its website. Prices are exclusive of shipping costs and order costs.

Friday’s action 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 cuts were made to spur lower demand and also to make more Model Y versions eligible for the $7,500 electric vehicle tax credit under the Inflation Reduction Act. The full tax credits will be available until at least March.

On Friday, the Treasury Department revised vehicle classification definitions to make more electric vehicles — including SUVs made by Tesla, Ford and General Motors — eligible for the full $7,500.

The change came after lobbying by automakers who had pressed the Biden administration to change vehicle definitions to allow higher-priced vehicles to receive maximum credit. Tesla CEO Elon Musk met with top aides to President Joe Biden last week to discuss the electric vehicle industry and broader electrification goals.

Under sweeping legislation approved last summer, pickup trucks, SUVs and vans with list prices of up to $80,000 are eligible for electric vehicle tax credits, while cars, sedans and wagons new electrics can only be sold for up to $55,000. The rule had disqualified some more expensive SUVs, such as GM’s Cadillac Lyriq and some Model Y versions, prompting complaints from Tesla and other automakers.

The January price cuts apparently worked. During Tesla’s earnings conference call last week, CEO Elon Musk said that so far in January, the company had seen the most year-to-date orders in Tesla history. the society. He also said the company raised the price of the Model Y “a bit in response to that.”

After Tesla’s price cuts, Ford responded by reducing the price of its Mustang Mach-E, partly to take advantage of the tax credit and also to stimulate buyer interest. But Crosstown rival General Motors said it has no plans to cut prices for electric vehicles.

The electric vehicle tax credits are among a host of changes enacted in the Cut Inflation Act, which Congress approved in August with only Democratic votes. The law is designed to boost sales of electric vehicles as part of a broader effort to reduce emissions of greenhouse gases that warm the planet.

But a complex web of requirements, including where vehicles and batteries must be manufactured to qualify, has cast doubt on buyers’ ability to receive the full $7,500 credit.

The Treasury Department said Friday it hopes to make it easier for consumers to find out which vehicles are eligible for credit. Under the revised rule, vehicle classifications will be determined by a fuel economy labeling standard aimed at consumers, rather than a more complicated formula set by the Environmental Protection Agency, the Treasury said.

A message was left Saturday seeking comments from Tesla on the price increases. The increases were reported Friday night by Bloomberg News.