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The new EV tax credits proposed by the Biden administration are bound to encourage more EV sales. However, if you are in the market for a Tesla Model Y, then you might not get as sweet of a deal. In anticipation of the upcoming EV tax credits, Tesla is adjusting its pricing accordingly.

Tesla Model Y price increased for the eighth time in 2021 ahead of EV tax credits

White Tesla Model Y parked at a lake with a red surfboard on top. Tesla has increased the price of the Model Y and it could be because of new EV tax credits
Tesla Model Y | Tesla Motors

Democrats, President Joe Biden, and the UAW are well on their way to passing legislation that would increase EV tax credits for union-built vehicles. The legislation would provide a potential $12,500 to be shaved off the top of any EV built in the United States by union labor. At the moment, Tesla vehicles would not qualify for the entire $12,500 because the EVs are not built by unionized auto workers. However, Teslas can still qualify for up to $7,500 in tax credits.

Since the new law would take the tax credits off the price of an EV at the time of purchase, Tesla is making moves to get more money upfront from its customers before getting the rest from Uncle Sam. Electrek noticed that Tesla has increased the price of the Model Y by $1,000.

The Tesla Model Y Long Range went up to $58,990 from $57,990, and the Tesla Model Y Performance went up to $63,990 from $62,990.

All of the incremental price increases over the year have added up to a significant cost. According to Electrek, the Tesla Model Y Long Range is $9,000 more than it was at the start of 2021.

Currently, Tesla’s are not eligible for any federal EV tax credits, but they qualify for state tax incentives. There is always the possibility that once the Build Back Better Act passes and the new federal tax incentives come back for Tesla, it may lower its prices. Though, that seems unlikely.

The Tesla Model S and Tesla Model X also saw price increases this year

A red Tesla Model S driving on a race track toward the camera
Tesla Model S | Tesla Motors

The Tesla Model Y is not the only vehicle from the EV maker to see its MSRP increase in 2021. In late October, Tesla increased the Model S and Model X price by approximately $5,000. That was the second $5,000 price increase within a few months for the Model S.

Additionally, the Tesla Model 3 saw multiple $500 price increases starting at the beginning of the year. The current purchase price of the Model 3 is $44,990, whereas previously, it started under $40k. It seems that Tesla tends to increase prices by $5,000 across the board.

Why are Tesla prices going up?

At the moment, we are speculating that Tesla is increasing prices on its vehicles due to the upcoming EV tax credits. Some Tesla fans were understandably upset to see the prices go up on cars while some features were removed in certain models.

However, Elon Musk himself responded on Twitter and cited “supply chain pressure” as one of the reasons for price bumps.

If you are in the market for a Tesla, it may be best to wait and see how the EV tax credits shake out before purchasing.


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