Change in EV tax credit rule spurs price increase by Tesla

DETROIT — Tesla has raised prices on its Model Y in the U.S., apparently because of rising demand and changes in U.S. government rules that make more versions of the small SUV eligible for tax credits.

The Austin, Texas, electric vehicle company bumped up the price of the Model Y Long Range version by about 2 percent to $54,990 and the Performance version by about 2.7 percent to $57,990, according to its website. The prices exclude shipping and an order fee.

The moves, made Friday, come three weeks after Tesla cut prices nearly 20 percent on some versions of the Model Y, the company’s top-selling vehicle. The price cuts were made 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 credits will be available at least into March.

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

The change came after lobbying by automakers that had pressed for the Biden administration to change vehicle definitions to allow higher priced vehicles to qualify for a maximum credit. Tesla CEO Elon Musk met with aides to President Joe Biden last week to discuss the EV industry and the broader goals of electrification.

Under the law approved last summer, pickups, SUVS and vans with a sticker price up to $80,000 qualify for EV tax credits, while new electric cars, sedans and wagons can only be priced up to $55,000. The rule had disqualified 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 cuts apparently worked. On Tesla’s earnings conference call last week, CEO Elon Musk said that in January the company had seen the strongest number of orders year-to-date in company history. He also said the company had raised the Model Y price “a little bit in response to that.”

Carlos Osorio The Associated Press file Tesla has raised prices on its Model Y in the U.S. to $54,990 and $57,990 depending on version. Demand for the Model Y increased in January.