Tesla Once Again Increases The Price Of The Model Y In An Attempt To Curb Demand Generated By Price Cuts

Tesla recently implemented a steep price cut across the company’s vehicle lineup and covering all geographical regions. Tesla’s first price cut happened on January 6 in China where the EV maker lowered the price of the Model 3 by 13.5% to $33,500 and the cost of the Model Y by 10% to $38,000.

And on January 12, Tesla followed up by cutting prices worldwide including in North America, Europe, and the rest of Asia. The largest of the price cuts occurred in the US where some variants of Tesla’s vehicles like the Long Range Model Y saw price cuts as high as 20%.

At the time, the price cuts lowered the starting price for the Long Range Model Y below $55,000 or more precisely to $53,000. The $55,000 price point was particularly important so that the vehicle would qualify for the $7,500 US Federal EV tax incentive. And, taking into account the incentive, Tesla had brought down starting price for the Model Y in the US to as low as $45,500 down from $66,000 a week prior.

The 20% price cut making the Model Y qualify for the US Tax rebate, and the tax incentive decreasing the price by a further 10%, has meant Tesla had effectively cut the price of the Model Y by 30%.

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The drastic nature of the price cuts had started rumors that Tesla was facing slowing demand for its vehicles. This sentiment was so prevalent, the issue of demand for Tesla vehicles was the first question asked at Tesla’s last earnings call on January 26.

Musk put to rest this rumor by stating, following the price cuts that Tesla was seeing twice as many orders for its vehicles than there is production.

However, in addition to Elon Musk’s words, we were also able to first-hand witness the spur in demand caused by the price adjustments. Soon after the price cuts, we saw delivery times for the Model Y in the US being pushed from 4 to 8 weeks to 8 to 16 weeks.

This prompted Tesla to increase the price of the Long Range Model Y by $500 to $53,500. And a few days later, when the cap to get the $7,500 incentive for the Model Y was raised from $55,000 to $80,000, Tesla once again increased the price of the Long Range Model Y by another $1,500 bringing the starting price of the vehicle up to $55,000 before any incentives.

The reason the price cap for the Model Y to get the $7,500 federal tax incentive was increased from $55,000 to $80,000 was that under the Inflation Reduction Act (IRA) passed by congress last year, pickup trucks, SUVs, and vans with a sticker price up to $80,000 qualify for the EV tax credits, while new electric cars, sedans, and wagons can only be priced up to $55,000.

And the Treasury Department, which is in charge of implementing the IRA, had classified all 5 seat versions of the Model Y as sedans due to their weight. However, after a public outcry a few days ago, the Treasury Department reclassified all versions of the Model Y as SUV which increased the price cap to get the incentive to $80,000.

And with Tesla’s price increases and the new higher tax incentive cap, the Model Y Long Range now starts at $47,500. Tesla seems to have implemented the price increase to shift demand from the Model Y to Tesla’s other vehicles, however, according to new Tesla inventory information that has come out last week, demand for Tesla’s mid-sized SUV doesn’t seem to be slowing down.

According to Tesladata.net which tracks available Tesla inventory vehicles, as of last week, there were only 7 Tesla Model Ys in the whole of the United States that can be ordered from inventory.

US Model Y inventory now at multi-month low. It's essentially zero. pic.twitter.com/eG0grkJnet— Sawyer Merritt (@SawyerMerritt) February 7, 2023

Having only 7 vehicles in inventory is incredible on its own let alone for a large auto OEM. Last year, the Tesla Model Y was the 4th best-selling vehicle in the world and the number one selling vehicle by revenue, selling more than 750,000 units.

However, what is even more impressive is that the Tesla Model Y inventory number went down to 7 vehicles from 1309 vehicles on January 12 – which is the day Tesla cut prices.

And with the low inventory numbers, Tesla has continued the Model Y price increase. However, this time the price adjustment was on the top-of-the-line performance Model Y which saw its price increase by $500 to $59,000.

This follows a similar price increase only a few days ago bumping the starting price of the Model Y Performance by $1,000 in a week.

The Model Y AWD which is the refreshed Model Y with 4680 cells also saw a similar price increase to that of the Performance variant and after the $1,000 price hike now starts at $52,000.

With all the Model Y price increases, Tesla is likely trying to keep wait times for the all-electric crossover to a minimum while at the same time pushing customers towards other Tesla vehicles.

Currently, it’s too early to say how Tesla’s pricing strategy is affecting the mix of vehicles the EV maker sells, however, we will be sure to keep you posted once we learn more about the issue. Until then make sure to visit our site torquenews.com/Tesla regularly for the latest updates.

So what do you think? Excited about the incredible demand for the Model Y? How do you think the price increases will affect wait times for the vehicle? Let me know your thoughts in the comments below.

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Tinsae Aregay has been following Tesla and The evolution of the EV space on a daily basis for several years. He covers everything about Tesla from the cars to Elon Musk, the energy business, and autonomy. Follow Tinsae on Twitter at @TinsaeAregay for daily Tesla news.