5-seat Tesla Model Y now eligible for the new EV tax credit even for those who already bought

The Treasury Department which oversees the new EV tax credit requirements has now widened its much criticized definition for an SUV, making the 5-seat Tesla Model Y finally eligible for federal subsidies, along with other neglected electric vehicles. President Biden's Inflation Reduction Act that passed last year pegged US$80,000 as the SUV price threshold under which they qualify for the full $7,500 tax credit.

Under the previous Treasury guidelines, however, only the 7-seat Tesla Model Y qualified for the higher threshold, while the 5-seater with only a few extras thrown in during purchase, often wasn't eligible as its US$53,490 starting tag is dangerously close to the US$55,000 subsidy price barrier reserved for other categories like electric sedans. Elon Musk did call those rules "messed up" and raised the question during his meetings in the White House last week, but it was also the heavy lobbying on behalf of GM that pushed the needle in the right direction. With the new widened SUV category the Cadillac Lyriq, as well as the Ford Mustang Mach-E, and the VW ID.4, are now also reclassified as SUVs and eligible for the full federal new EV tax credit.

Those who bought a Model Y 5-seater that fell outside the price threshold can now claim the subsidy, too, as per the Treasury: "Customers who have purchased and placed in service vehicles since January 1, 2023, that qualify under the EPA Fuel Economy Labeling classification standard announced today and who satisfy the other clean vehicle tax credit requirements can claim the credit, including customers with vehicles that did not qualify under the prior EPA CAFE standard."

The reclassification happened as the Treasury decided to switch from the EPA's CAFE standards to its "consumer-facing EPA Fuel Economy Labeling standard" and as a consequence it says that "this change will allow crossover vehicles that share similar features to be treated consistently." The Treasury used the announcement to remind that it will issue the final guidance on the sourcing of battery materials requirement in March, maintaining the free-for-all tax credit status quo which made Senator Manchin propose a bill demanding an immediate halt of EV subsidy disbursements to those that fall outside the stringent made-in-America requirements in the Inflation Reduction Act.

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