Why Tesla Suddenly Raised Model Y Prices After Suddenly Lowering Them

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Unless you’ve got something classic, like a 1929 Duesenberg Model J ‘Butterfly’ Dual-Cowl Phaeton or a 1989 Corolla All-Trac Wagon, the price of your not-too-old car is going to be somewhat dictated by the price of the new car. When Tesla decided to slash its prices overnight it was good news for buyers but terrible news for sellers (CarMax off-loaded most of its inventory). Now Tesla is slowly raising its prices again. What’s going on here?

We have an explanation of that, some good news for Aston fans, an update on Faraday Future, and some BMW news. But Tesla has once again elbowed its way into the top spot.

Tesla Wants To Use Its Weight Against Carmakers And Its Own Customers Are The Victims (Or Beneficiaries)

0x0 Tesla Model 3 01

It was big news last month when Tesla, reacting to the opportunity created by EV tax credit rules and declining demand, dropped its prices by thousands of dollars (including up to 23% off a Tesla Model Performance Y).

How you felt about this was likely predicated based on who you are and what your plans are:

  • If you just bought a Tesla you’re cranky because not only did you apparently overpay for your car, your car is now suddenly worth even more than the standard depreciation you expected (or maybe didn’t since tight supplies have kept used car residual values higher than normal).
  • If you’re in the market for a new Tesla it was good news, because now you’re getting a massive discount.
  • If you’re in the market for a used Tesla it was probably good news as well, because you can either afford a new one or try to argue for a lower price on a used model.
  • If you’re a used car dealer you’re confused and worried, because who knows what’s going to happen next?
  • If you’re the EV competition, you’re wondering how you react to this price war. Ford cut its prices on the Mach-E; other automakers are taking a wait-and-see approach.

If you just bought a Tesla, I feel some sympathy for you for missing out on a great deal, but them’s the breaks when you’re dealing with Elon Musk. If you scored a cheap deal on a new Tesla, awesome news for you. It’s extra awesome news because Tesla just increased their prices on the Model Y Long Range by $1,500 and the Model Y Performance by $1,000, so you bought at what was probably the bottom of the market.

Why did this happen? Ostensibly, this is because the IRS clarified its rules over what’s an SUV and what’s a passenger car in favor of automaker demands. Before, a Model Y didn’t qualify for the $80,000 cap, so its cars needed to be priced under $55,000. That’s not the case anymore, so prices are back up again. In theory, Elon Musk could have raised the price of his cars an even greater amount, so this slight adjustment is not that big of a deal. Car companies do this all the time. For example, Ford’s raised the price of the electric F-150 Lightning so many times I’ve lost count.

What’s the bigger reason this is happening? First, check out this graphic showing Tesla vehicle production by quarter. Tesla is not a non-profit. When demand was high and production was constrained it raised prices. Now that production is high and there’s competition from others (in particular, BYD) it’s in a good position to lower prices to maintain as much of its large market share as it possibly can.

Second, Tesla is still the big heavy and it can push its weight around to try and make life harder for the competition. Ford, for instance, dropped the prices of its Mach-E seemingly in response to Tesla and the IRS. Ford is fairly advanced in the production of the Mach-E so it could probably do this without as much difficulty as other companies.

Other companies, however, haven’t made adjustments. One big reason? Many of them are already priced to be competitive with Teslas. Automotive News put out a good article on this topic, and I think this bit is key:

The most inexpensive VW ID4, at $40,290 with shipping, is already less expensive than Tesla’s base Model Y at $55,130 with shipping. Hyundai’s Ioniq 5 starts at $42,785 with shipping.

Brian Moody, executive editor for Kelley Blue Book, said legacy automakers can’t ignore Tesla because of its dominance of the EV market, but they also don’t have to follow Tesla’s strategy of cutting prices to juice demand.

“Another strategy is: We’re not going to lower our prices on our current models because we think they are priced right,” Moody said. “But we are going to offer a small truck at a lower price and a small sedan at a lower price. Those things are coming.”

It’s good to be an EV consumer now because if you can’t wait for a car there are good deals to be had.

My guess is that the best year to be an EV customer is in 2024 when we get point-of-sale tax credits, automakers have (hopefully) built enough infrastructure in North America to qualify for those tax credits, and we’re suddenly drowning in competitive models with decent range serviced by a more robust charging network. Just a guess.

BMW Putting $872 Million In Mexican Plant

As I was saying, the Inflation Reduction Act has led to a rush to build electric vehicles and their parts in North America and Mexico just gained nearly a billion dollars in investment from BMW for a new plant in San Luis Potosi.

From Bloomberg via The Detroit News:

More than half of the investment will be used to build a new high-voltage battery assembly plant at the site, the German carmaker said Friday, confirming a January announcement of Mexican President Andres Manuel Lopez Obrador. The expansion will create around 1,000 new jobs, with EV production scheduled to start in 2027.

The Mexican plant will produce EVs based on BMW’s “Neue Klasse” underpinnings — a new platform that is central to the company’s efforts to take on Tesla Inc., which continues to dominate global EV sales. BMW aims to cut cell costs by half and increase range and charging speed by 30% compared to current models.

The Neue Klasse commeth, though not fastesth enough for everyone.

Faraday’s Future Looks A Little (?) Brighter (???)

Faraday Future Ff 91
Photo credit: Faraday Future

I’m really happy with the headline “Faraday Future Continues To Produce More Drama Than Actual Cars.” That’s some solid work. Also in the pantheon of fun headlines about California-based EV company Faraday Future is “Controversial Chinese Billionaire Will Try To Save EV Company That Spent $3 Billion And Hasn’t Delivered A Car.” Classic.

The good news for Faraday Future comes in the form of this Reuters headline: “Faraday Future shares soar on securing funding to start EV production.” What’s going on?

Shares of Faraday Future Intelligent Electric Inc (FFIE.O) soared about 28% in premarket trading on Monday after the company said it had raised enough funds to start production of its electric luxury car FF 91 Futurist in March.

Delivery of the sports utility vehicle, originally slated to start in late 2022, will now begin before the end of April, the company said on Sunday.

The development offered a spot of relief to investors who have seen the stock plummet 92% since listing in July 2021 as the loss-making startup grappled with a boardroom battle, governance issues and a dwindling cash balance that hurt its production plans.

The markets are opening soon so we’ll see how far the company climbs (though it’s still hovering way lower than its all-time high of $18.45). Building cars is both the most important part of proving you have a real company and also the hardest part. Just ask Rivian.

(Editor’s note: That fact that anyone is still writing about Faraday Future in the Year of our Lord 2023 is baffling. Every time I see a new headline about this company, I have to check to make sure I didn’t accidentally drop acid that morning. So why are they still at it after, you know, everything? The WSJ speculates it could just get snatched up by someone else, maybe even a fossil fuel company. That makes more sense to me than FF ever becoming an actual, going concern as a car-producing entity. -PG)

Aston Martin Is Going To Pikes Peak

Here’s a selfish plug. I enjoy Pikes Peak quite a bit. The “race to the clouds” outside of Colorado Springs sees cars starting at about 9,000 feet and racing up a 12.42-mile ‘track’ to reach a finish line more than 14,000 feet in the sky. It’s incredible and I even produced and co-directed a docu-series about it that’s still streaming on Motor Trend on Demand for your viewing pleasure.

One of the most interesting trends in recent years is the slow realization that the wild, often open-wheel prototype cars built for conquering the mountain are slowly giving way to GT3 cars and even production vehicles. Last year Robin Shute won handily in his Unlimited Class prototype, but right behind him were a mostly stock 2022 Porsche 911 Turbo S and GT2 RS Club Sport. Wild times.

This trend will continue this year with the first-ever entrant of an Aston Martin in the race. The car will be a Vantage GT3 Race Car run by British firm Venture Engineering. The even bigger news is that the team has selected last year’s champion Robin Shute as its driver. That’s cool. They’re running the car in Time Attack 1 Class this year, which is a great place for a new car. Next year? They want to put a car into the Unlimited class, which has me thinking they’re going for it all.

The race is going to take place on Sunday, June 25th, and the best way to see it is to go. You should go.

The… Question Part

Am I wrong? Is 2024 too soon to buy an EV? When’s the right time?

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68 thoughts on “Why Tesla Suddenly Raised Model Y Prices After Suddenly Lowering Them

  1. Tesla’s price fluctuations should put to rest any argument that we would be better off with direct sales models. Whether its the manufacturer or the dealer no one is going to leave money on the table.

  2. I’ve cross-shopped BEVs against ICE vehicles and hybrids. At the end of the day, BEVs are still vehicles. Just because it has an electric powertrain doesn’t mean it can’t take the place of an ICE vehicle for most.

    On my last 2-3 vehicle purchases, I explored what was available in terms of BEVs that I could afford, but decided to stick with something like a Honda Fit.

    And it had more to do with availability than anything else… you can’t buy what isn’t available for your price range.

    I expect that to change as the decade progresses.

    1. Ive been preaching for a few years now that the people who should be buying EVs are the suburbanites with long commutes. Just about everyone else would be better served by an ICE vehicle. You need a house for charging because offsite charging is inconvenient and expensive and you need enough commuting miles to soak up the extra price premium for the EV through gas savings. There are some other nice perks for the commuter task like quiet operation and power delivery but I would only use that if you are already shopping the price point for the EV.

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