Tesla Increases Model Y Costs by $1,000 After U.S. Tax Credit Rules Are Loosened

Tesla Inc increased the price of its best-selling vehicle, the Model Y, by $1,000 in the United States after the government lifted the price cap for crossover electric vehicles eligible for tax incentives.

Tesla (NASDAQ:TSLA) raised the price of the Model Y Long Range to $54,990 and the Model Y Performance to $57,990, an increase of $1,000 for each vehicle, according to its website's current and previous prices.

It was the second price hike in the past two weeks for the Model Y Long Range.

Prior to accounting for the $7,500 tax credit purchasers are now eligible to receive, the models are 15% and 17% less expensive than they were before Tesla lowered prices last month to stimulate demand.

In a reversal, the Treasury Department declared on Friday that crossovers such as the Model Y are eligible for electric car tax credits if they are priced at less than $80,000. The cap for vehicles, sedans, and station wagons is reduced to $55,000.

This was a victory for Tesla, General Motors (NYSE:GM), Ford, and other manufacturers who had lobbied the Biden administration to expand the vehicle definitions in the incentive plan's execution so that more of their lines would be eligible.

At the prior price, a Tesla Model Y customer could only add roughly $1,000 in extra equipment, such as a tow hitch, before the price exceeded the threshold at which the tax credit would apply.

In January, Tesla lowered prices globally in response to signals of weakening demand. It reduced costs again in South Korea on Friday.

After the initial round of price drops, Elon Musk, the company's chief executive, reported that vehicle orders were roughly double the company's output in January. He stated that the Model Y's first modest price hike was the result of a surge in consumer demand.