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Tesla price increases used to be a somewhat infrequent and relatively innocuous occurrence. Not anymore. So far in 2021 the Model 3 has increased in price (MSRP) 23%. The Model Y is not far behind at a 20% price hike!
What’s behind the Tesla price increases? Should we expect to see more? Does this effect existing orders? Are other automakers increasing their prices this much? Let’s address this and more below!
Tesla Model 3 Price Increases
First, let’s start by simply looking at the data.
Tesla has not been shy about increases the price of their most affordable vehicle (the Model 3). Below is a table of Model 3 Standard Range Plus (SR+) base MSRP from February of 2019 to today.
Date
Price
Price Change
02/28/19
$37,000
03/21/19
$37,500
$500.00
04/11/19
$39,500
$2,000.00
05/14/19
$39,900
$400.00
07/15/19
$38,990
-$910.00
10/17/19
$39,490
$500.00
12/13/19
$39,990
$500.00
05/27/20
$37,990
-$2,000.00
02/17/21
$36,990
-$1,000.00
03/11/21
$37,490
$500.00
03/24/21
$37,990
$500.00
04/08/21
$38,490
$500.00
04/22/21
$38,990
$500.00
05/06/21
$39,490
$500.00
05/21/21
$39,990
$500.00
10/05/21
$41,990
$2,000.00
10/22/21
$43,990
$2,000.00
11/04/21
$44,990
$1,000.00
Since February of 2019 there have been 18 MSRP changes for the Model 3 SR+. 3 have been price decreases, 15 have been price increases. As you can see, just in the past few months the Model 3 has increased in price by $5,000.
This may have something to do with the fact that new EV tax credits are likely to increase consumer demand in 2022.
Tesla Model Y Price Increases
Tesla’s Model Y was first available for purchase in March of 2019. Since then the most common version, the LR-AWD (long range all wheel drive) trim has seen its price increase considerably.
Are other automakers raising their prices as much as Tesla?
No! While we expect automakers to increase their base MSRPs considerably in 2022, we have yet to see any other manufacturer increase them as much as Tesla.
Toyota has come closest with their nearly 20% price increase for the newly redesigned 2022 Toyota Tundra, however that is a brand new redesign. No other automakers has increased their mid-year production models MSRP anywhere near as much as Tesla has.
Why is Tesla increasing their prices so much right now?
There are two primary factors as to why Tesla is increasing their MSRP so aggressively right now. The first relates to ongoing supply chain disruptions and the chip shortage. The second has to do with new EV tax credits that will most certainly drive an increase in Tesla demand.
The ongoing chip shortage has impacted all automakers, and Tesla has not been immune to it. While their production numbers have been healthy (especially relative to peers), Tesla has struggled to produce vehicles to their specifications. Earlier in 2021 Tesla silently began removing some features and functionality from their vehicles because of a lack of chips.
There is obviously a “supply side” issue thanks to global supply chain struggles and the chip shortage, but what about demand?
Demand for new Teslas has been healthy, and it should only increase in 2022. New EV tax credits will increase Tesla demand. Previous EV tax credits no longer apply to Tesla, however the credits that will be available in 2022 will. It makes sense that Tesla is increasing their prices right now, because when consumers get $7,500 (or more) in tax credits from the government, they’ll still feel like they’re getting a great deal.
Pair a decreasing supply with an increase in EV demand, and you can start to see why Tesla is proactively raising their prices. Not to mention there is higher inflation than prior years, and you can begin to fully comprehend why we’ve seen Tesla prices increase as much as they have.
2023 Update: Major revisions to the EV tax credit were signed into law as part of the Inflation Reduction Act of 2022.
Here’s what you need to know about the latest EV tax credit revision proposal:
The 200,000 sale cap is replaced with an expiration date of December 31, 2032.
It will bring the tax credit back for Tesla, GM, Toyota and all other EV automakers, but only if strict requirements are met.
Vans, SUVs, and trucks with MSRPs up to $80,000 qualify. Electric sedans priced up to $55,000 MSRP qualify.
The tax credit will remain at $7,500, however it is now divided into $3,750 for battery mineral sourcing and $3,750 for battery component sourcing.
Final assembly must be in the United States, Canada or Mexico as soon as the bill is signed into law.
Battery minerals must be at least 40% sourced in the US or countries we have free trade agreements with until 2024, when it will begin to increase incrementally by 10% through 2028.
Battery components must be at least 50% sourced in the US or countries we have free trade agreements with until 2024, when it will begin to increase incrementally by 10% through 2028.
It will become income-limited to individual tax filers with adjusted gross incomes of $150,000 or less, and joint filers with incomes of $300,000 or less.
The tax credit can be implemented at the point of sale instead of on taxes beginning on January 1, 2024. This effectively makes it a rebate. Before this date, it remains a tax credit.
Used EVs would now be eligible for a $4,000 federal tax credit, wit a price cap of $25,000. Used EVs must be at least two years old, and the used credit can only be claimed once in the life of the vehicle.
Tax filers can claim only one used EV tax credit every three years.
Plug-in Hybrids (PHEVs) are eligible, but must meet the same strict requirements above.
The Transition Rule allows for buyers with a “written binding contract” signed before the Inflation Reduction Act is signed into law to claim the original $7,500 credit. This includes any models that will lose the credit with the revision.
As you can see, the EV tax credit is becoming a lot more complicated.
All 755 pages of the Inflation Reduction Act can be read here. The EV tax credit begins on page 381.
The EV tax credit update is not all good news. Several popular electric models would be kicked out of the tax credit until assembly, battery production and raw materials sourcing happens in North America.
These are electric vehicles that would not qualify for the tax credit under the proposed revision:
Tesla Model 3 (too expensive, RWD batteries produced overseas)
Tesla Model S and Model X (too expensive)
Rivian R1T and R1S (too expensive)
Lucid Air (too expensive)
Hyundai IONIQ 5 and Genesis GV60 (produced in Korea)
Hyundai Kona and Kia Niro electrics
Kia EV6 (produced in Korea)
Nissan Ariya (produced overseas)
Volvo and Polestar EVs (produced in Europe)
Fisker Ocean (produced in Europe)
Toyota bZ4X (produced overseas)
Subaru Solterra (produced overseas)
Official eligibility is a moving target it seems. We recommend checking the latest updates directly from the U.S. government at fueleconomy.gov for a list of eligible vehicles.
In 2023, current EV tax credits are nonrefundable, meaning the best you can get from the current EV tax credit is cancelling out other federal income taxes you owe, with no refund beyond that. The revised electric vehicle tax credits will become refundable beginning in 2024, meaning you could potentially get money back from the government for simply buying an EV.
The Build Back Better Act would have increased the maximum electric vehicle tax credit to $12,500, however it was defeated in Congress. The BBB EV tax credit provisions controversially included an additional $4,500 incentive for EVs assembled at unionized plants.
The original EV tax credit in place from 2009 to August 2022 took away the incentive once an automaker sold 200,000 EVs or PHEVs. For this reason, Tesla and GM had lost eligibility, but are now getting it back (as long as vehicles remain under the price caps).
EV tax credit income limits
The new clean vehicle credit establishes the following income caps based on adjusted gross income (AGI):
$150,000 for single filers
$225,000 for head of household filers
$300,000 for joint filers
EV tax credit price caps
Sedans are capped at $55,000
SUVs and trucks are capped at $80,000
Once the used EV tax credit begins in 2024, it is capped at $25,000
What vehicles qualify for the new EV tax credit?
Great news for Model Y buyers, but bad news for fans of the IONIQ 5, EV6 and several other foreign-made electric cars. The Inflation Reduction Act’s Clean Vehicle Credit returns incentives to some, and takes incentives away from others.
The Tesla Model Y will qualify for the new tax credit, as long as price remains below $80,000.
The RWD Model 3 will qualify IF Tesla sources batteries from the US or Free Trade Agreement countries. Right now CATL from China makes their LFP batteries.
GM electric vehicles such as the Bolt EV and EUV will again qualify.
The Mustang Mach-E will qualify, as long as batteries are sourced from Free Trade Agreement countries.
Kia and Hyundai EVs will NOT qualify until they are assembled in North America.
Carvana (allegedly) sold someone a stolen truck. Yes, you read that correctly. A viral video on TikTok from a woman named Erin Stitt depicts the saga her and her boyfriend went through buying a 2018 Chevy Silverado Midnight Edition from Carvana, only to be stopped by six police cars and have the truck they just bought towed away.
Here’s what we know, and what you need to be aware of before you buy a car from Carvana, Vrooom, or any car dealer.
Erin’s story is an unfortunate case of VIN cloning. This is where thieves steal a car (or in this case a truck) and cover up the vehicle’s VIN plates with a different VIN number. Criminals do this to obfuscate the true identity of the vehicle.
The procedure involves replacing the serial plate of a stolen or salvage repaired vehicle with a plate containing the number of a validly registered vehicle of similar make, model and year from another state, province or country.
VIN cloning is more rampant than you would have thought. For example, there was one case from Tampa, Florida, where the FBI found more than 1,000 cloned cars were sold across 20 different states. The most unfortunate aspect of this is that the purchaser is still be responsible for any outstanding loans, even though they didn’t realize they purchased a “cloned” car.
How did it pass state inspection?
Erin posed this question in her TikTok video, “How did a stolen truck pass state inspection?” That’s a great question, however it’s not too difficult to understand once you dig into the state inspection requirements for many of the 50 states. Most don’t require a VIN inspection, and heck, even if they do, there’s a good chance the inspector will not notice the fake VIN plates.
How can you protect yourself from buying a stolen vehicle?
What steps can you take as a car buyer to avoid being in Erin’s situation? There are a few things you can do:
If you are buying a used vehicle, always get it pre-purchased inspected. There’s no guarantee that a mechanic will be able to determine if a VIN plate is fake or not, but it’s always best to pay $150 or so to have a second set of eyes look over a vehicle.
If you are buying a car from Carvana or Vroom, and you can’t get an inspection before purchasing the vehicle, get an inspection immediately afterwards so that you can return the car within 7 days if you do identify an issue. In Erin’s case they had to take the vehicle in for service because of issues with the OnStar system, this was an initial “flag” that could have let them know to return the vehicle.
Another common scam to watch out for: title washing
VIN cloning is common (sadly), and another form of deception that criminals use from time to time is called title washing. We have an entire article on title washing that I encourage you to read here: https://stg-caredge-staging.kinsta.cloud/guides/title-washing/
Used and new car prices are climbing through the roof, and the rapidly increasing “destination charge” could be the culprit. The increase in destination charges, also known as “shipping” or “freight” charges has increased so rapidly that three class action lawsuits are currently being litigated.
Destination Charge Increases
Here’s how much major automakers have increased their destination charges since 2017.
2021 Model year avg.
Change from 2017 model year
BMW
$973
–17%
Ford
$1,393
29%
GM
$1,242
21%
Honda
$1,204
23%
Hyundai/Kia
$1,104
23%
Mercedes-Benz
$1,097
18%
Nissan
$1,236
24%
Porsche
$1,350
29%
Stellantis
$1,573
16%
Subaru
$996
18%
Tata
$1,195
20%
Tesla
$1,200
5.9%
Toyota
$1,127
15%
Volkswagen
$1,207
–0.3%
Industry average
$1,220
12%
What is a destination charge?
The destination charge, also sometimes portrayed online as a shipping fee, are hidden from online advertised prices, however every buyer pays for them. Heck, even the dealership where you buy the car pays a destination fee, they simply pass that along to the end buyer.
The destination charge is a line item on the manufacturer’s invoice for a vehicle. It is a fee that the automaker sets. There is a retail price for it, and a wholesale price for it. The dealer pays a wholesale price, the consumer pays a retail price. In many cases the price is actually the same.
Destination charges are set by the manufacturer and are non-negotiable, since they are part of the vehicle’s MSRP. The manufacturer’s suggested retail price is non-negotiable (it is set by the manufacturer), however you can (and should!) negotiate your total out-the-door price (which includes a hopefully discounted selling price).
It is well known in the automotive industry that manufactures make a profit on their destination charges. Currently there are 3 active class action lawsuits against GM, Ford, and Stellantis for “deceptive” delivery fees.
From the GM lawsuit:
The lawsuit, filed in the Southern District of California, involves two plaintiffs who allege they were not aware that GM made a profit off of the destination fees it charges customers. According to Car Complaints, the plaintiffs are California resident Robert Romoff, who recently purchased a new 2021 Chevrolet Equinox with a $1,195 destination charge, and New Jersey resident Joe Siciliano, who purchased a new 2019 Cadillac Escalade with a $995 destination charge.
Who has increased their destination charge the most?
Stellantis, formerly Fiat Chrysler has increased their destination charges the most. Consumer Reports found Stellantis’ destination charges increased an average of 90 percent for Chrysler, Dodge and Jeep from 2011 to 2020, and 74 percent for Ram over the same period. And, even though no one buys them, Stellantis increased Fiat’s destination charge by 114 percent since 2012.
Surprising to many is the fact that domestically produced vehicles are also getting hit with VERY high destination charges. Take for example the new Jeep Grand Wagoneer which is built in Michigan. It comes with a $2,000+ destination charge.
What’s frustrating about the increase in destination fees is that it is yet another “black box” in the car buying process. Not only do we (consumers) have to deal with BS and bogus fees from the dealership, we also have to simply “accept” theses hidden profit fees from the manufacturers.
Automakers are in a pickle: delay production of cars because of a lack of chips, or produce cars, trucks, and SUVs missing some features customers have come to expect? It’s fascinating to see how different automakers are handling this once in a lifetime supply chain conundrum!
Ford, for example, just announced that they will ship and sell vehicles without chips controlling non-safety critical features. Yes, you read that right. It’s 2022, and Ford is getting even more desperate for semiconductors. It’s doubtful that there are any optimists left with regards to the auto industry supply shortage.
Ford isn’t the only manufacturer that is struggling to produce vehicles with all of their standard equipment. Let’s break down who is doing what, and which features consumers should and shouldn’t expect in their new car.
Ford to deliver thousands of vehicles without non-safety critical features
In March 2022, Ford told dealers that the chip shortage is getting worse, and that they’re going to need dealer’s help to sort things out. Automotive News reports that Ford executives told dealers that the automaker will have to enact a worst-case scenario plan that was floated last summer. Ford’s plan is to ship new vehicles to dealers without many of the semiconductor chips that are essential for features like auto stop-start, heated seats, and certain infotainment functions.
Ford spokesman Said Deep told Automotive News Ford would build Explorers without rear seat heat controls that could be added later. Ford already offers customers the option to order F-150s without the auto stop-start feature. Deep told Automotive News that in the case of the Explorers, buyers will receive a price reduction for the change, and Ford will restore rear seat passenger control of heating and air conditioning for free at a later date.
On the hunt for the elusive Ford Bronco? Thousands were recently seen waiting for parts outside of a production plant in Michigan. Patience and compromise will go a long way for car shoppers in 2022.
GM removes many features
General Motors has seemingly been hit the hardest by the ongoing chip shortage. While the company tries to move forward, many core features and functionalities have been removed from their lineup.
GM removed heated and ventilated seats and heated steering wheels
General Motors made headlines late on Friday, November 12th when they announced that beginning on Monday, November 15th they would stop production of most of their vehicles with heated and ventilated seats, as well as heated steering wheels.
The effected vehicles include:
Chevrolet Colorado
Chevrolet Blazer
Chevrolet Equinox
GMC Canyon
GMC Terrain
All Chevy Silverados and Traverses except High Country trims
All GMC Sierras and Acadias except Denalis
General Motors has not signaled when the vehicles would be produced with their previously expected equipment. GM has said that effected customers will be eligible for a $150 to $500 credit.
Earlier this year, GM removed climate control digital temperature displays, side blind zone alert and Super Cruise driver-assist technology on certain 2022 vehicles. Fortunately, now those features are available.
Update 11/22/21
On Friday November 19th, in a memo to their dealers, GM announced that they will reduce the credit given to customers who do not receive vehicles with heated seats. Instead of a credit up to $500, GM will credit customers up to $50. Correct, $50 for losing heated seats in their car. That’s crazy.
GM also instructed dealers that they think they will be able to retrofit vehicles with heated and ventilated seats by mid-2022. GM told dealers that heated steering wheels cannot be retrofitted, so vehicles missing that feature will still be discounted by $150.
Chevrolet and GMC lose HD Radio and wireless charging
Earlier in 2021, GM said it would eliminate the HD radio option because of a lack of semiconductors. Both 2021 Chevrolet Silverado 1500s and GMC Sierra 1500s, as well as 2022 model year 2500 and 3500 heavy-duty pickups were impacted. All trim levels were affected, and GM is offering buyers of a $50 credit.
Also earlier this year, GM announced that wireless charging pads would not make it into many of its vehicles. The 2021 Chevy Tahoe, Suburban, and GMC Yukon SUVs as well as the 2022 Buick Enclave, Chevy Traverse, and Cadillac XT5 and XT6 were all impacted by this decision.
Vehicles for sale without the charging pad will get a $75 credit.
GM removes auto stop-start and V-8 cylinder deactivation
Two core features that help make GM trucks more fuel efficient have gone missing: auto stop-start, and cylinder deactivation. In June, GM said the 2021 Silverado 1500 and the GMC Sierra 1500 would not come with stop-start technology. Customers who miss out on this feature are entitled to another $50 credit.
Even earlier this year, GM announced that some 2021 Chevy Silverado and GMC Sierra models would use more gas because they would not have their cylinder-deactivation systems. The impact? The trucks would increase their fuel usage by one mile per gallon.
BMW removes touchscreens from their cars
A brand new BMW X7 SUV has an MSRP of upwards of $100,000. At that price, you’d expect to get any feature or option you could possibly imagine. Buy a new car in 2021 and you’ll notice a piece of equipment nearly as ubiquitous as the seatbelt, however in your new $100,000 X7 you won’t have it; a touchscreen.
The effected vehicles include:
3-series
4-series coupe and convertible
4-series Gran Coupe (excluding i4)
Z4
All variants of the X5, X6, and X7
BMWs that were also ordered with the Parking Assistant package will now lose BMW’s Backup Assistant technology.
Porsche removes adjustable seat and electric steering column adjustment
Earlier this Spring, Porsche told its U.S. dealers that their 18-way adjustable seat option (part of a $2,090 upgrade) would not be available. It appears that today the option is back for the Macan.
Another feature temporarily missing from some new Porsches is the electric steering column adjustment. Earlier this month, Porsche spokesperson Christian Weiss said that Porsche has been in communication with customers who have ordered cars with this feature, and said it will deliver vehicles with a manual steering column adjustment for the time being. Once available, the electric version will be retrofitted.
Tesla removes USB ports and passenger-seat lumbar support
Even thought hey have raised their MSRP by 20%+ in 2021, Tesla has not been immune from chip shortage challenges. Earlier this year in May, Tesla removed lumbar support from the front passenger seat in the Model 3 and Model Y EVs.
Recently, another feature was silently deleted, USB-C ports in the rear of the center console of the Model 3 and Model Y.
How will this affect used car prices?
Used car prices have ben skyrocketing for the past year. With new car production unable to keep up with demand, we have seen wholesale and retail used car prices set all-time highs. Frequently we are seeing used cars sell for more than their original MSRP.
Interestingly, with new vehicles being sold without all of their standard features, we wouldn’t be surprised if there is even more upward pressure on newer model year used vehicles. Would a consumer pay a premium for a used 2020 or 2021 that has all of the functionality they’ve come to expect, or wait for a factory order that may or may not have the features they expect? We think consumer demand for new user vehicles will continue to drive used car prices up.
States eligibile for below invoice pricing and 100% free delivery:
Alabama, Arkansas, Texas, Oklahoma, Florida, Georgia, Kentucky, Louisiana, Maryland, Delaware, Mississippi, North Carolina, South Carolina, Tennessee, Virginia, and West Virginia.
What if I don’t live in these states? If you're outside these areas, don't worry! We're committed to making sure everyone can enjoy our deals. Although the delivery fee will not be waived, you can still purchase from CarEdge and either pay for shipping or coordinate pickup at a participating dealer.
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