On Friday, the Treasury Department updated the way it classifies vehicles that qualify for the $7,500 EV tax credit under the Inflation Reduction Act (IRA). The change should allow more vehicles – including the Model Y – to qualify for the credit, because it now not places certain SUVs in the identical category as sedans.
Previously, some Model Y models, together with the Cadillac Lyriq, were ineligible for the electrical vehicle tax credit because their sticker prices exceeded the $55,000 maximum suggested retail price for sedans.
But now that the federal government is using the EPA’s fuel economy standard for vehicle classification as a substitute of the EPA’s corporate standard (CAFE) for vehicle classification, the Model Y and Cadillac Lyriq now fall into the SUV category. This gives Tesla more leeway in terms of pricing, as vehicles on this category may be priced as high as $80,000 to qualify for the tax credit.
However, it continues to be unclear how the Treasury Department’s list of eligible vehicles will change in March. Then the agency is predicted to issue guidelines for applying the IRA’s strict rules on the sourcing and production of minerals and battery components utilized in electric vehicles.