Tesla (TSLA) shares are trading higher today as the IRS updated its criteria for what qualifies as an SUV, and this means more EV tax credits are available.
According to new rules, the IRS will use the EPA’s guidelines for which vehicles qualify as an SUV or crossover, meaning all models of the Tesla Model Y qualify for the higher $80,000 price cap for the EV tax credit. The tax credits, which are funded via the IRA (Inflation Reduction Act), previously used IRS guidance that only classified the 7-passenger variants of the Model Y as an SUV.
“To make it easier for consumers to know which vehicles qualify under the applicable MSRP cap, Treasury is updating the vehicle classification standard to use the consumer-facing EPA Fuel Economy Labeling standard, rather than the EPA CAFE standard. This change will allow crossover vehicles that share similar features to be treated consistently,” Treasury said in a statement.
The new guidance also allows all variants of the Ford Mustang Mach-E EV, Volkswagen ID.4 EV, and the Cadillac LYRIQ EV to use the higher $80,000 SUV price cap.
John Bozzella, president and CEO of trade group the Alliance for Automotive Innovation, said in statement that the reclassification was “a very good decision that clears up some EV tax credit confusion and instantly helps customers shopping today (and tomorrow) for an electric crossover or SUV.”
Ford shares were also paring earlier losses on the news, though weaker than expected Q4 earnings results are weighing on the stock. Shares of GM are also trading higher on the news.
This story is developing.