Enlarge / Tesla Model Y electric vehicles in a lot at the Tesla Inc. Gigafactory in Gruenheide, Germany, on Saturday, Jan. 21, 2023. (credit: Liesa Johannssen/Bloomberg via Getty Images)

Barely three weeks after slashing its prices in order to qualify for federal tax incentives for clean vehicles, Tesla has increased the prices of some of its best-selling electric vehicles. At the beginning of January, a five-seat Tesla Model Y long-range crossover cost $65,990; on January 12 Tesla dropped this to $52,990. Now, that has gone up by $2,000 to $54,990. And the Model Y Performance saw its price drop from $69,990 to $56,990; today that same EV will cost $57,990.

The original price drops in January allowed the Model Y to qualify for new clean vehicle tax credits introduced in the Inflation Reduction Act of 2022. Among other changes, the new tax credit regulations imposed a price cap on new EVs in order to qualify, with a larger $80,000 price cap for SUVs, trucks, and vans compared to sedans, which are capped at $55,000 for eligibility.

Originally, the Treasury said it would use the US Environmental Protection Agency's Corporate Average Fuel Efficiency classification to determine what was a car and what was a light truck—a category that includes SUVs and vans but excluded crossovers like the Ford Mustang Mach-E, the Cadillac Lyriq, the Volkswagen ID.4, and yes, the Tesla Model Y. (The seven-seater Model Y was classified as an SUV, however.)

Enlarge (credit: Getty Images)

On Friday the US Treasury Department published an update to the way it implements the new clean vehicle tax credit. Introduced in the Inflation Reduction Act of 2022, the new rules restrict the number of EVs that qualify for a federal tax credit of up to $7,500 with income and price caps, as well as a requirement for final assembly in North America and, once the Treasury has written some more guidance, a requirement for domestic content and value in the EV battery.

When the new rules came out in January, there were some complaints that some five-seat crossovers—the Cadillac Lyriq, Tesla Model Y, and Volkswagen ID.4—were being counted as sedans, with a $55,000 MSRP cap; anyone buying any of those EVs with a purchase price of more than $55,000 was ineligible for the tax credit, although the seven-seat Model Y was classified as an SUV and therefore only subject to an $80,000 MSRP limit.

The reason for that was the Treasury using the US Environmental Protection Agency's Corporate Average Fuel Economy standard classification, which categorizes light trucks (including SUVs and minivans) differently from passenger cars. But there's a separate EPA fuel economy labeling standard, used in consumer-facing applications, that already counted the Lyriq, Model Y, and ID.4 as crossovers and not sedans.