Tesla price hikes: What you need to know about higher Model Y prices

Yahoo Finance's Pras Subramanian breaks down everything you need to know about Tesla raising the price of its Model Y vehicle in the U.S.

Video transcript

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PRAS SUBRAMANIAN: Tesla is raising the price for the Model Y after the US government issued a rule change for its EV tax credit. Here's what you need to know.

Tesla hiking the price of its Model Y Long Range by 2%, giving the electric vehicle a new price tag of $54,990. The price hike is coming on the heels of a significant rule change for how the government defines an SUV, allowing more vehicles to fall within the SUV category and still qualify for the federal government's $7,500 EV tax credit, even at higher prices. Tesla's CEO Elon Musk has publicly criticized the government's eligibility rules in the past and just last week met with top White House officials to discuss shared goals around electrification and advancing electric vehicle production.

The adjusted guidance now caps the Model Y's eligibility for the tax credit at $80,000, giving Tesla a lot more room to run in terms of incrementally raising prices. The bottom line for consumers looking at EVs, you might want to order one now before prices rise again.