Tesla, the electric vehicle company, recently raised the prices of its Model Y in the United States, due to rising demand and changes in government rules that make more versions of the small SUV eligible for tax credits. The company increased the price of the Model Y Long Range version by 2% to $54,990 and the Performance version by 2.7% to $57,990, as per its website.

Model Y price rise

Why the Price Hike for Model Y?

The price hike by Tesla comes three weeks after it had cut prices nearly 20% on some versions of the Model Y, the company’s top-selling vehicle. The price cuts were aimed at boosting sagging demand and making 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 until March.

The Treasury Department recently revised vehicle classification definitions to make more electric vehicles (EVs) eligible for the full $7,500 tax credit, including SUVs made by Tesla, Ford, and General Motors. The change came after lobbying by automakers, who had pressed the Biden administration to change vehicle definitions to allow higher-priced vehicles to qualify for a maximum credit. The EV tax credits are part of the Inflation Reduction Act, which Congress approved in August, to spur EV sales and reduce planet-warming greenhouse gas emissions.


Tesla’s price cuts in January apparently worked, and the company saw the strongest number of orders in company history. The company raised the Model Y price “a little bit in response to that”, as per Elon Musk, Tesla’s CEO. The Treasury Department hopes to make it easier for consumers to know which vehicles qualify for the credit. Under the revised rule, vehicle classifications will be determined by a consumer-facing fuel economy labeling standard, rather than a complicated formula set by the Environmental Protection Agency. Tesla’s recent price hike reflects the company’s confidence in its Model Y product, as well as the increasing demand for EVs and the government’s efforts to spur EV sales.

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