Tesla has increased the price of its Model Y in the United States due to soaring demand and changes in government regulations that make additional versions of the compact SUV eligible for tax incentives, as per AP's report.
GRUENHEIDE, GERMANY - MARCH 25: In this aerial view newly completed Tesla Model Y electric cars stand at the new Tesla Gigafactory electric car manufacturing plant on March 25, 2022 near Gruenheide, Germany. The new plant, officially called the Gigafactory Berlin-Brandenburg, officially opened on March 22 with an event with German Chancellor Olaf Scholz and Tesla CEO Elon Musk. The new plant is producing the Model Y as well as electric car batteries.
Model Y's Price Hikes
According to its website, the EV maker giant raised the prices of the Model Y Long Range version by roughly 2% to $54,990 and the Performance version by about 2.7% to $57,990.
Three weeks ago, Tesla lowered costs on some models of the Model Y, the company's best-selling vehicle, by roughly 20%.
The price reductions were implemented to increase lagging demand as well as to expand the number of Model Y models that qualify for the $7,500 electric vehicle tax credit provided by the Inflation Reduction Act.
The Treasury Department updated its vehicle classification definitions on Friday, allowing more EVs to qualify for the full $7,500 tax credit, including SUVs built by Tesla, General Motors, Ford, and many more.
The update happened due to automakers' lobbying to alter the definitions of automobiles so that more expensive vehicles would be eligible for the maximum credit.
In fact, Tesla CEO Elon Musk talked to senior advisors of President Joe Biden to talk about the EV market.
Read also: Tesla Q4 2022: More than 405,000 EV Deliveries, New Record-Still Misses Wall Street Expectations
EV Tax Credit Law
According to the law, new electric vehicles, sedans, and wagons can only be sold for up to $55,000, while pickup trucks, SUVs, and vans with a sticker price of up to $80,000 are eligible for EV tax credits.
The policy had earlier caused objections from Tesla and other automakers since it banned some more expensive SUVs, including some versions of the Model Y and GM's Cadillac Lyriq.
It appears that the price reductions from January were successful. Musk stated on the company's earnings conference call last week that the company had had the largest year-to-date order volume ever.
Ford decreased the price of its Mustang Mach-E in response to Tesla's pricing decreases, partly to be eligible for the tax credit.
The Inflation Reduction Act passed several amendments, including the EV tax credits. The law aims to increase EV sales as part of a larger initiative to cut greenhouse gas emissions.
But it is unclear whether customers will be able to take advantage of the entire $7,500 credit for many requirements, such as where vehicles and batteries must be produced to quality, according to AP.
According to the Treasury Department, it wants to make it simpler for consumers to understand which vehicles are eligible for the credit.
A consumer-facing fuel efficiency labeling standard instead of the formula established by the Environmental Protection Agency will be used to classify vehicles under the updated rule.
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