The Holy Grail of EV adoption is said to arrive when mainstream EVs can cost under $30,000. For some American buyers, this is already a reality – thanks to government subsidies.
Earlier this week, Tesla (TSLA) announced on its website that the The Model 3 sedan is now eligible for the full federal electric vehicle tax credit $7,500; previously, the cheaper Model 3 Rear-Wheel Drive (RWD) version qualified for half the amount. The federal government confirmed the announcement fueleconomy.gov website.
The federal government’s EV tax credit requirements require that 40% of critical minerals be mined in the United States or a country with a free trade agreement, 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 is assumed that Tesla updated where it sourced the material for the Model 3 RWD batteries or where it assembled the packs. Before the announcement, Tesla reportedly used LFP (Lithium Ion Phosphate) battery cells. made by China’s CATL.
However, including the full federal tax credit means the Tesla Model 3 RWD now costs $32,740 if buyers meet income restrictions and the MSRP cap ($55,000 for cars and $80,000 for trucks and SUVs).
While $32,740 is a relative bargain in the new-car market, where the average price is around $45,000, there could be more incentives for electric vehicles like the Model 3 to push prices even lower. New York State offers up to $2,000 in rebates for electric vehicles through the Drive Clean Rebate, which the 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. Including federal and California state incentives brings the Model 3 down to $25,240 — which Reuters notes below that is the price of a new Toyota Camry (starting price $26,320).
Additionally, Tesla has local incentives in states like California for certain vehicles. Tesla is currently offering a $2,410 incentive for the Model 3 RWD in Southern California, which means that the price of this car, including all tax credits, drops to a whopping $22,830 if the buyer meets all eligibility requirements.
Tesla investors and analysts are looking to the 3rd generation vehicle platform to open up a whole new market of middle class and younger buyers for electric vehicles. It turns out that some buyers, especially in California, can now get a Tesla on the cheap — at least while the incentives last.
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Pras Subramanian is a reporter for Yahoo Finance. You can follow him Twitter and on Instagram.
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