At the end of last year, Tesla hit a new record moving more metal than it ever has in one quarter. The king of the pack, the group leader, is the Model Y, which is by some metrics the world’s best-selling car. But in the face of a radically changed EV market, will the Model Y have what it takes to keep that title? Possibly.
I can’t speak for incentives, pricing, and legislation in other countries, but here in the United States, The Model Y looks primed to keep the momentum going, at least for a little while. Changes in the Inflation Reduction Act’s implementation allow the Model Y to stand out as probably the only truly great deal in the U.S. EV market.
Starting this year, the Inflation Reduction Act’s tax credit bonus now shifts to a rebate able to be used at the vehicle’s point of sale. However, stricter rules have significantly slashed the available vehicles eligible, and even some North American-made EVs absolutely take it on the nose. The Ford Mustang Mach-E loses all credits, as do the Volkswagen ID.4 and Nissan Leaf.
The remaining models eligible are thirsty PHEVs like the Wrangler 4xe, or expensive SUVs and pickups, like the Ford F-150 Lightning, Rivian R1, and Tesla Model X, or discontinued cars like the Chevrolet Bolt EV and EUV twins.
Not counting PHEVs, there are only about seven distinct model lines that qualify for the EV tax credit via a purchase. All of them are way more expensive and way bigger than the midsized to compact crossovers we’ve all fallen in love with.
All except one. Technically two, but I’m focusing on one—the Tesla Model Y.
It’s arguable that the Model Y is so popular less because of its merits as a car, but more so because it’s such a screaming deal. There are several ways to get into a Tesla for not much money: the single motor, 260-mile range Model Y can be had for $43,990, not including destination or any other fees. Likewise, the 330-mile range dual-motor AWD can be had for $46,050, provided you’re willing to settle for whatever color and wheel option Tesla has available.
Those are solidly competitive prices for a premium crossover, no matter the propulsion type. A gas or hybrid-powered Lexus NX350, or Acura RDX, in theory, matches the Model Y in terms of premium prestige. But, add in the IRA’s point-of-sale tax credit, and the Model Y becomes an absolute bargain. At $36,490 (RWD) and $38,550 (AWD, on-lot discounts), the Model Y becomes as cheap as mid to high-trimmed compact crossovers. Hell, it’s a stone’s throw away from a few of the subcompact crossovers I’ve driven not that long ago.
And I think that’s why the Model Y is so darn successful. At $36,490, a RWD Model Y is about $3,000 more than the top-of-the-line Hyundai Kona Limited AWD I drove last year. In the era of financed purchases, the Tesla would likely be maybe $20-30 extra per month more expensive than a budget Hyundai subcompact, an easily stretchable number for buyers. Likewise, the AWD Model Y hits right at the heart, reaching price parity with any given number of compact crossovers, including the Toyota RAV4 and Honda CR-V.
Of course, there are plenty of concerns about Tesla and Elon Musk himself, which rightfully keeps folks away from signing on the dotted line. Also, the Model Y itself is not for everyone; the interior is spartan, the car feels kind of narrow, and the center-mounted do-it-all screen can be frustrating. Yet, overlooking those gripes, it’s easy to see why it’s selling so well. Drivers they’re getting what they perceive as a premium BMW competitor, for budget crossover money. I’d wager that the electric part might just be secondary to that type of customer.
It’s not clear if pricing the Model Y like this is sustainable or healthy for the brand. Last year was marked by Tesla’s constant and dramatic price cuts on the Model 3 and Model Y, many pundits said this was to spur sluggish demand for an old product. It’s true that the Model Y is somewhat old, but none of that stuff really matters to the average consumer who is probably still new to the EV world. The Model Y still hits hard on the value front.
For the consumer in search of a good deal, the Model Y is really only matched by the Chevrolet Bolt—a car that’s been canceled. A couple of automakers have tried to dethrone the Tesla Model Y, but none (in the U.S., at least) have succeeded. And we don’t expect that to change in 2024. None of them can seem to match the value that lies in the Tesla Model Y.