Tesla Model Y’s price is increased by $1000 after the vehicle gains full access to a $7,500 EV tax credit. The EV tax credit price limit was increased to $80,000 thus adding more vehicles to the eligibility list. Earlier the limit was $55,000 for all vehicles, now it’s an MSRP limit of $80,000 on SUVs and pickup trucks.
The Tesla Model Y only qualified with a seven-seat configuration and other SUVs, like the Ford Mustang Mach-E, also weren’t considered SUVs, according to the IRS list. That’s despite the VW ID.4, which has about the same size as the Model Y and Mach-E, being considered an SUV and getting access to the tax credit for a price of up to $80,000. It appears that the IRS defines an SUV only by the vehicle’s GVWR or Gross Vehicle Weight Rating, which appears to need to be over 6,000 lbs to be considered an SUV. There might also be some other criteria that the IRS hasn’t shared because, again, there are some inconsistencies in the list if it’s just based on weight.
Many EV enthusiasts are seeing this as a major mistake since it goes against the purpose of the program, which is to encourage sales of more efficient vehicles. Vehicles with lighter weights are more efficient. There are several SUVs that have less cargo space than the Tesla Model Y and Ford Mustang Mach-E that are considered SUVs in the program, like the BMW X5 plug-in and Jeep Wrangler plug-in.
Tesla increased the price of the Model Y Long Range to $54,990, and the Model Y Performance to $57,990, an increase of $1,000 each, according to current and previous prices posted on its website. It was the second increase in price for the Model Y Long Range over the past two weeks. The models remain 15% and 17% cheaper, respectively, than they were before Tesla slashed prices last month to stoke demand, before accounting for the $7,500 tax credit buyers now qualify to receive.
In a reversal, the Treasury Department ruled on Friday that crossovers like the Model Y would qualify for electric vehicle tax credits. That represented a win for Tesla, General Motors, Ford, and other automakers that had pressed the Biden administration to loosen the vehicle definitions in the implementation of the incentive plan to make more of their lineups eligible. At its previous price, a Tesla buyer of a Model Y would only have been able to add about $1,000 in extra features, such as a tow hitch, before pushing the price above the level at which the tax incentive would apply.