Article:
How the Full Federal Tax Credit Makes Tesla’s Model 3 More Affordable
As production costs for electric vehicles (EVs) reduce, the push for further adoption of this eco-friendly transport technology has intensified. One crucial factor behind increased EV adoption is the cost. Experts have noted that EV adoption will increase once conventional EVs can be purchased for under $30,000. Thanks to government subsidies, this is now a reality for some buyers in the US.
Tesla, the leading EV manufacturer, recently announced on its website that all versions of its Model 3 sedan now qualify for the full federal EV tax credit ($7,500). Before the announcement, the rear-wheel drive (RWD) version qualified for only half this amount. The federal government confirmed the announcement on its fueleconomy.gov website.
The inclusion of federal and California state incentives brings the price of a Model 3 down to $25,240, lower than the starting price of a new Toyota Camry ($26,320).
While $32,740 is still relatively high for a new car, that number can be significantly lowered with additional incentives such as the New York State Drive Clean rebate, which offers up to $2,000 off qualifying EVs. Additionally, California offers a generous $7,500 tax refund for low-income buyers. California residents can also take advantage of local incentives such as a $2,410 rebate for the Model 3 RWD in Southern California, potentially bringing the price down to $22,830 if the buyer meets eligibility requirements.
Tesla’s investors and analysts have high hopes for the company’s gen-3 vehicle platform, which could open up a whole new market of middle-class and younger buyers for EVs. It turns out that some of those buyers, especially in California, can get a cheap Tesla right now, at least while the incentives last.
Why the Tax Credit Is Critical for EV Adoption
In many states, EV adoption is promoted through various incentives, such as tax credits. One of the most impactful incentives is the federal EV tax credit, which can reduce the cost of purchasing a new EV. From a policy standpoint, tax credits work as demand-side incentives, which aim to reduce the cost of EVs to make them more affordable for consumers.
The federal EV tax credit was first introduced in 2008 to encourage EV adoption. Under the current system, eligible taxpayers can claim a credit of up to $7,500 on their federal income tax for qualifying EVs. To be eligible, the EV must have a gross vehicle weight rating of fewer than 14,000 pounds and be powered primarily by an electric motor that draws electricity from a battery that has at least 4 kWh of capacity.
Beyond the federal EV tax credit, many states offer additional EV incentives. For instance, some states provide lower registration fees for EVs, while others offer tax exemptions, rebates, and purchase incentives. These incentives have become a crucial factor in EV adoption, as they help bridge the gap between EVs and traditional gas vehicles.
The Impact of Government Requirements on EV Tax Credits
Federal government requirements for the EV tax credit call for 40% of critical minerals to be mined in the US or a free-trade country, and 50% of the value of battery components must be manufactured or assembled in North America. Although not expressly stated, the inclusion of these requirements suggests that previous versions of Tesla’s Model 3 RWD did not meet them.
According to reports, Tesla was previously using LFP (Lithium-Ion Phosphate) battery cells made by CATL of China, potentially disqualifying the RWD version from receiving the full tax credit. However, it seems that Tesla has now updated where it sources materials for Model 3 RWD batteries or assembled packs, thereby meeting the government’s requirements.
While the government’s requirements may seem stringent, they aim to foster the growth of local production capability and the EV supply chain. This, in turn, can generate well-paying jobs and reduce dependence on foreign imports.
Tesla’s Impact on EVs and the Automotive Industry
As the leading EV manufacturer, Tesla has had a tremendous impact on the automotive industry. Tesla’s EVs are known for their sleek design, cutting-edge technology, and impressive acceleration. More importantly, Tesla has effectively demonstrated that EVs can match the performance and convenience of traditional gas vehicles.
Tesla’s innovative EV designs have inspired numerous other EV manufacturers to develop their own models. As a result, this has shifted the automotive industry’s focus towards environmentally-friendly vehicle technology. Furthermore, it has fostered increased competition, which is driving down the cost of production, making EVs more affordable for consumers.
Tesla’s impact on EV technology is hard to overstate. The company’s engineers have developed a suite of technologies, including battery technology, semi-autonomous driving systems, and over-the-air updates, which have revolutionized the way people think about and use their cars.
The Future of EVs and Tesla
The increase in EV adoption is exciting, especially with Tesla leading the way. However, the future of EVs and Tesla is still uncertain. For instance, Tesla’s reliance on subsidies and government incentives to make its cars affordable raises concerns about the automaker’s long-term financial viability. Moreover, other automakers are quickly catching up to Tesla’s technological lead, making it difficult for the company to maintain its market share.
Nevertheless, Tesla’s impact on the automotive industry has been transformative, enhancing the EV ownership experience, and creating a community of avid EV enthusiasts. Furthermore, Tesla is expected to expand its reach beyond its current lineup of electric cars, bringing the company into new markets like energy storage and solar power.
Summary:
Thanks to government subsidies and the full federal EV tax credit, the Tesla Model 3 is now more affordable for some buyers in the US, with prices as low as $25,240. This has been enabled by the government’s demand-side incentives aimed at reducing the cost of EVs to make them more affordable for consumers.
The federal government requirements for the EV tax credit call for 40% of critical minerals to be mined in the US or a free-trade country, and 50% of the value of battery components must be manufactured or assembled in North America. Tesla’s compliance with these requirements has made its EVs more accessible to a wider market, thereby spurring increased EV adoption.
However, the future of EVs and Tesla is still uncertain, with concerns about the automaker’s long-term financial viability and the competition challenging the company’s technological lead. Regardless, Tesla’s impact on the automotive industry has been transformative, and the company is expected to continue innovating and expanding its reach beyond its current lineup of electric cars.
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the holy grail for electric vehicle Adoption is said to come once conventional electric vehicles can be had for less than $30,000. For some buyers in the US, this is now a reality, thanks to government subsidies.
earlier this week tesla (TSLA) announced on its website that all versions of the Model 3 sedan now qualifies for full federal electric vehicle tax credit $7,500; before the cheapest model 3 The rear-wheel drive (RWD) version qualified for half the amount. The federal government confirmed the announcement in its fueleconomy.gov website.
Federal government requirements for the EV tax credit call for 40% of critical minerals to be mined in the US or a free trade country, and 50% of the value of battery components must be manufactured or assembled in North America.
Although no reason was given for the change, it can be assumed that Tesla updated where it sourced materials for Model 3 RWD batteries or assembled packs. Prior to the announcement, Tesla was reportedly using LFP (Lithium Ion Phosphate) battery cells. made by CATL of China.
However, the inclusion of the full federal tax credit means that the tesla model 3 RWD now costs $32,740 if buyers meet criteria including income restrictions and MSRP limits ($55,000 for cars; $80,000 for trucks and SUV).
While $32,740 is a relative deal on a new car In a market where the median price is around $45,000, you can have more incentives on electric vehicles like the Model 3 that drive prices down even further. New York State offers up to $2,000 off electric vehicles through its Drive Clean rebate that Model 3 qualifies for.
In California, the state offers an even bigger incentive: a $7,500 tax refund that depends on income and other requirements. The inclusion of federal and California state incentives brings the Model 3 down to $25,240, which Reuters notes is below the cost of a new one toyota camry (starting price $26,320).
Additionally, Tesla has local incentives in states like California for specific vehicles. Tesla is currently offering a $2,410 incentive for the Model 3 RWD in Southern California, which means the price of this car, including all tax breaks, drops to $22,830 if the buyer meets all eligibility requirements.
Tesla’s investors and analysts are looking to its gen-3 vehicle platform to open up a whole new market of middle-class and younger buyers for electric vehicles. It turns out that some of those buyers, especially in California, could get a cheap Tesla right now, at least while the incentives last.
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Pras Subramanian is a reporter for Yahoo Finance. You can follow him on Twitter and in instagram.
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https://www.autoblog.com/2023/06/06/tesla-model-3-now-costs-as-little-as-23k-in-california-thanks-to-tax-credits/
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