Tesla’s Model Y Sells Out After Price Cuts, Tax Moves. Buyers Face a Wait.

The combination of Tesla price cuts and changes to incentives from the U.S. government has been a boon to orders.

The recently passed Inflation Reduction Act included a purchase tax credit of up to $7,500 for qualifying electric vehicles (EVs). To qualify for the full amount a car has to be under a certain price and be manufactured in North America, as well as having its batteries and their components sourced from certain places, among other factors the government considers.

The battery and battery component piece of the tax credit equation was a little difficult for the IRS—the arm of the Treasury Department responsible for implementing the tax credit. So to start the year, the IRS said any EV manufactured in North America qualified for the full credit as long as it met the pricing limits.

To start the year, the Model Y didn’t qualify for the credit. The IRS considers theY more like a car than an SUV. To qualify, a car had to be priced at less than $55,000. An electric SUV, or truck, can cost up to $80,000.

The car limit applied to a Model Y is partly what led Tesla to slash Model Y prices by up to $13,000. After that, the IRS decided to treat the Y like and SUV and all trims qualified for the credit.

It’s been a confusing start to the year for the EV industry. But in the end, all the changes have led to a surge in ordering for Model Ys. Which has exhausted inventories as well as production slots for the first quarter.

Selling out is great for Tesla. Its stock was up 0.8% in premarket trading Thursday, possibly because of Electrek’s finding.
S&P 500
and
Nasdaq Composite
futures were both flat.

Selling out does introduce some new uncertainty for Tesla buyers. The IRS will revisit which EVs qualify for what in March. If the IRS decides to disqualify batteries sourced from Asia, some EVs—and possibly Model Ys—could lose up to $3,750 of the credit.

Maybe U.S. car buyers will consider the older Model 3—delivery times still show February to March on the company’s website. Tesla is rumored to be updating the Model 3, which is probably a smart idea. The vehicle first went on sale in 2017.

The Y is the more popular of the two vehicles. Tesla sold about 252,000 Model Ys in the U.S. in 2022. It sold about 212,000 Model 3s.

Coming into Thursday trading, Tesla shares were up about 74% so far this year. They are still about $10 below where they were when CEO Elon Musk completed his acquisition of Twitter.