Tesla Just Raised Prices on the Model Y - Why This Was a Good Thing

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We see that Tesla just raised prices on the Model Y. This is a good thing for Tesla to do right now - here's why.

Tesla Raises Prices on Model Y

Tesla just raised prices on the Model Y, and we view this as a good thing. Recently, Tesla drastically lowered prices, making the popular electric SUV affordable to more people.

However, there is one problem that happened when Tesla lowered prices on the Model Y - Tesla started to sell many more of them and their inventory levels started to drop.

This means that Tesla will eventually not have enough Model Y vehicles in inventory to sell to customers. This is a supply and demand issue, and Tesla is raising the price of the Model Y to compensate.

Whenever you have a product that is in more demand than you have supply, you must raise prices. Whenever you have a product that is in less demand than you have supply, you must lower prices. Tesla is simply following basic economics.

Tesla raised the price of the Model Y by $500. It's inventory of the Model Y got reduced by 80% and therefore, this is a favorable price cut.

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Why Raising Prices Was Needed

If you've been following Farzad Mesbahi on Twitter and YouTube, you will see that he is consistently sharing the inventory levels for the Model 3 and Model Y vehicles for Tesla.

It's great that he is doing this because you can see pretty regularly if the inventory is going up or down. When I saw that the Model Y inventory was going down fast, I knew that Tesla would have to raise prices to compensate.

When Tesla lowered the price of the Model 3 and Model Y - both vehicles qualified for the U.S. IRA $7,500 tax credit. However, Tesla lowered the Model Y a few thousand dollars less than it needed to. This may have been a mistake by Tesla, as inventory just about sold out within a couple of weeks.

The small price increase still allows the Model Y to qualify for the $7,500 tax credit. The options on the vehicle, however, will be limited for it to still qualify. You won't be able to change much in the way of paint and the wheels, or else it will go over $55,000 and no longer qualify.

You can, however, purchase FSD or Enhanced Autopilot for the Model Y and those won't count toward the $55,000 base price for the IRA tax credit. Not only that, you can subscribe to FSD for $199 a month instead of buying it upfront for $15,000.

What do you think of this small price increase for the Model Y? Will Tesla continue to increase prices?

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Jeremy Johnson is a Tesla investor and supporter. He first invested in Tesla in 2017 after years of following Elon Musk and admiring his work ethic and intelligence. Since then, he's become a Tesla bull, covering anything about Tesla he can find, while also dabbling in other electric vehicle companies. Jeremy covers Tesla developments at Torque News. You can follow him on Twitter or LinkedIn to stay in touch and follow his Tesla news coverage on Torque News.

Image Credit, Tesla, Screenshot