Tesla recently reduced the prices of some of its best-selling electric vehicles in an attempt to qualify for federal tax incentives for clean vehicles. And now, only three weeks later, Tesla has upped the prices of some of its best EVs.
At the beginning of this year, a Tesla Model Y long-range crossover went for around $65,990, but by January 12 Tesla dropped its price to $52,990. Now it has gone up again by about $2000 to $54,990. The Tesla Model Y Performance saw a price drop from $69,990 to $56,990 and now also got a $2000 bump.
The initial drops in prices allowed the Model Y to qualify as a clean vehicle and get tax credits (as introduced in the Inflation Reduction Act of 2022). The new tax credit regulations imposed a price cap for new EVs to qualify, with a larger $80,000 price cap for SUVs, trucks, and vans. Meanwhile, sedans will remain capped at $55,000 to stay eligible.
Tesla Model Y Price Changes
The US Treasury initially planned to classify cars and light trucks based on the EPA’s Corporate Average Fuel Efficiency classification, excluding crossovers such as the Ford Mustang Mach-E, the Cadillac Lyriq, the Volkswagen ID.4, and the Tesla Model Y (which was classified as an SUV). However, last week the Treasury changed its approach and used the consumer-friendly EPA labels that classified these models as crossover SUVs, making them eligible for tax credits. This eligibility is temporary and will change in next month due to new rules regarding battery component sourcing.
While the recent price cuts on Tesla vehicles may have been favorable for new buyers, they negatively impacted used car prices. A study by iSeeCars found that used Tesla prices fell by 5% following the price cuts, compared to a 1.5% decrease for the rest of the market. According to the study, this resulted in a decline of $2,354 for used Model 3 and $2,816 for used Model Y prices.