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After adjusting the EV tax credit, Tesla raises the price of the Model Y.

As part of the Inflation Reduction Act, the Treasury Department revised the categories of vehicles that are eligible for the $7,500 EV tax credit on Friday (IRA). It’s expected that more vehicles, such as the Model Y, will be able to take advantage of the credit as a result of the revision, which removes the Model Y and some other SUV crossovers from the same category as sedans.

Due to their prices being higher than the $55,000 SRP threshold for sedans, the Model Y and the Cadillac Lyriq were previously ineligible for the EV tax credit.

Now that the government uses the EPA’s Fuel Economy Labeling standard rather than the EPA’s corporate average fuel economy (CAFE) standard, the Model Y and the Cadillac Lyriq are classified as SUVs. As vehicles in this category can cost up to $80,000 and still qualify for the tax credit, Tesla now has more room to manoeuvre in terms of pricing.

The exact nature of the March update to the Treasury Department’s list of eligible vehicles remains to be seen. The IRA has stringent rules regarding the sourcing and manufacturing of the minerals and battery components used in EVs, and the agency is expected to release its guidance on how to apply these rules at that time.