Tesla's recent price cuts sent shock waves through the automotive industry and simultaneously opened the price war in the electric car market. Due to fundamentally high margins, Tesla was able to turn the price screw very quickly and to a considerable extent in the face of falling demand. This is in stark contrast to its fiercest competitors, whose significantly lower margins are likely to prevent larger price reductions and, if they are implemented, will be accompanied by further cost savings in other areas of the companies. Indeed, only Ford is in a position to counter Tesla's attack on the Mustang Mach-E with price cuts of its own, while other manufacturers, for their part, continue to refrain from cutting prices on their electric models. Now, however, there's another bonus on top for customers, as the Model Y continues to receive the full $7,500 tax credit, but now even up to a significantly higher total price.
Tesla Model Y Gets Tax Credit Up To $80,000
At the turn of the year, the U.S. Treasury Department released a full list of electric vehicles that will have access to the $7,500 EV tax credit in the future. And, indeed, the framework for Tesla's Model Y is changing significantly. Namely, while the model was not previously listed in the SUV category, it is now moving up in the ranks of models in that vehicle category. So far so good. More important for new customers, however, might be the accompanying increase in the eligible price cap for the Model Y. This rises from $55,000 to $80,000, which should make Tesla's compact SUV even more attractive in the future.
Until now, the Model Y, unlike many of its competitors, had been denied classification in the SUV subsidy category. Instead, the SUV, like the Model 3, was sorted into the lower subsidy level of up to $55,000. This was another reason why Tesla had recently cut the prices for the two models considerably, as it was the only way that at least some model variants could fall below the $55,000 threshold and thus become eligible. Tesla itself, in turn, was planning on growing sales from the new eligibility.
Big Threat For The Strongest Competitors
While many competitors such as the Volkswagen ID.4 were already eligible up to a price limit of $80,000, the Ford Mustang Mach-E now joins the ranks of eligible SUVs, along with the Model Y. However, while Volkswagen has already announced it will not join Tesla's price war, Ford is ready to return the attack and lower prices on its Mustang SUV. In the future, therefore, a duel could increasingly develop between Tesla and Ford on the North American market, which is likely to be defined in particular by lower prices compared with the competition.
However, with the higher classification now in place, Tesla is actually no longer dependent on keeping the price of the Model Y below $55,000 in order to benefit from the subsidy. So, it will be exciting to see if the price of the SUV will rise again as quickly as it has recently dropped and how Ford might respond.