Tesla Nudges Up Model Y Prices

The price of the performance version of the SUV on Saturday, $57,990, was $1,000 higher than the January low.

On Friday, the Biden administration modified rules to effectively expand the population of electric vehicles that qualify for a $7,500 consumer tax credit, including the Model Y. The Treasury Department raised the price limit for eligibility on certain models to $80,000, from $55,000, following auto-industry complaints.

Tesla made big price cuts across its vehicle lineup last month, aimed in part at ensuring that more of its models cost less than the $55,000 threshold to qualify for the federal subsidy, Tesla Chief Financial Officer

Zach Kirkhorn

said. With add-ons, the cost of a car can exceed the base.

It’s unclear whether Tesla adjusted the prices in response to Friday’s rule change. The company didn’t respond to a request for comment.

The government’s higher price threshold effectively gives Tesla more latitude to raise prices, since the Model Y, its top-selling vehicle, is now comfortably below the $80,000 cap. Other EVs that had eligibility raised to $80,000 because of Treasury’s rule change include

General Motors Co.

’s Cadillac Lyriq SUV and

Ford Motor Co.

’s Mustang Mach-E. 

Tesla’s price cut pressured competitors and drew a backlash from customers who had bought vehicles in the weeks and months before the reduction. A few weeks after Tesla’s reductions, Ford cut prices on its Mustang Mach-E SUV, a direct Model Y rival. 

The Treasury Department has been crafting rules to implement pieces of the Inflation Reduction Act, which was passed last year and includes significant changes to the government’s electric-vehicle incentive program and other measures to spur EV adoption. Auto industry lobbyists have praised aspects of the law but complained about the classification of some electric SUVs as sedans, which made them subject to the $55,000 cap.

Tesla Chief Executive

Elon Musk

had criticized the initial eligibility rules and urged customers to comment on it directly to the government. 

“Messed up!” Mr. Musk said on Twitter last month, referring to the government’s classification of the Model Y as a sedan.

Write to Mike Colias at [email protected] and Rebecca Elliott at [email protected]