On Friday, the Treasury Department updated the way it classifies vehicles that qualify for its $7,500 EV tax credit as part of the Inflation Reduction Act (IRA). The change should allow more vehicles, including the Model Y, to qualify for the credit, since it no longer puts certain crossover SUVs in the same category as sedans.
Previously, some Model Y models, along with the Cadillac Lyriq, were not eligible for the EV tax credit because their sticker prices exceeded the maximum suggested retail price of $55,000 for sedans.
But now that the government uses the Environmental Protection Agency’s (EPA) fuel economy labeling standard instead of the EPA’s Corporate Average Fuel Economy (CAFE) standard to classify vehicles, the Model Y and Cadillac Lyriq now belong to the SUV category. This gives Tesla more leeway when it comes to pricing, as vehicles in this category can be priced as high as $80,000 to qualify for the tax credit.
However, it is not yet clear how the Treasury Department’s list of qualified vehicles will change in March. That’s when the agency is expected to release its guidance on how to apply the IRA’s strict rules surrounding the sourcing and manufacturing of the minerals and battery components used in electric vehicles.
