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Tesla Once Again Increases Prices as US Department of Treasury Expands Subsidization

published: 2023-02-04 9:30

The US Department of Treasury has finally given up on the controversial classification standard on SUVs, and is now easing up on the eligibility of subsidization for various types of electric SUVs, where manufacturers such as Volkswagen, Ford, Tesla, and Cadillac will be benefitted from the decision.

The Treasury announced today that the several EV models that had previously triggered a controversy are now categorized as SUVs, and corresponding buyers are able to receive a carbon-reduction subsidization of US$7,500 when purchasing SUVs below US$80K.

In order to elevate EV popularization and accomplish the target of carbon reduction, the tax preferential policy offered by the US government is divided for two models, and has a wealthy-excluded threshold that rules general vehicles to not exceed US$55K and SUVs to remain below US$80K in order to be eligible for the tax reduction.

With that being said, vehicles including Ford’s Mustang Mach-E, Cadillac’s Lyriq, and the 5-seater Tesla Model Y were all listed as normal models instead of SUVs by the eligible list previously announced by the Treasury, where owners would be deprived of a US$7,500 subsidy since these models are over US$55K.

These four models that were previously excluded as SUVs have triggered a controversy. (Source: made by TechNews)

Fortunately, the Treasury admitted its mistake and listed the aforementioned models as SUVs, since they do indeed fit into the generally perceived shape of SUVs. In addition, this particular amendment will trace back to January 1st 2023, thus owners who had purchased a vehicle during January are also eligible for the subsidy.

Despite no official explanation, the timing of Tesla’s previous price drop had almost coincided with the announcement of the Treasury, and Tesla US announced an increase in prices straight after the Treasury’s amendment of the classification standard, where Model Y LR now rises from US$53,490 to US$54,990 under a 2.8% increment.

General Motors (GM), who is in a good relationship with the government and unions, had spent considerable efforts on lobbying related personnel in order to pass the above-mentioned subsidy, since the particular incentive is the last resort for Cadillac’s Lyriq.

What’s interesting is that Elon Musk had once said that he hopes the government would cancel all EV subsidies and let the market decide. Musk, after the Treasury announced the eligibility for subsidization, tweeted an angry tweet that criticized the action. According to the coverage of foreign media, Musk headed to the White House last week and mentioned this matter when discussing issues regarding EV development.

It is worth noting that the EV subsidy policy of the US is designed based on the Inflation Reduction Act, and not all EVs can be subsidized. Eligible vehicles must be assembled in the US, with batteries and raw materials of batteries being produced in North America. Under these conditions, there is actually a low number of vehicles that can receive subsidization, where the EVs of Benz, Kia, Toyota, and Porsche would not be eligible.

It is evident that there are larger issues to tackle on top of EVs and subsidy, such as international politics and trade wars, which showcases just how significant the measure can be.

 (Cover photo source: Model Y)

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