The market for electric vehicles is buzzing after a recent announcement by Tesla regarding its Model 3 and the batteries that power it.
For some drivers, Tesla's Model 3 has gotten so cheap that it now can cost less than a Toyota Camry.
The EV market grappled with new requirements set by the federal government last year regarding clean vehicle tax credits for new plug-in electric and fuel cell vehicles. The passing of the Inflation Reduction Act led to a significant change in the tax credit system laid out by the IRS, adding additional requirements for vehicles to qualify for the tax credit.
Under the new legislation that went into effect in April, a vehicle's final assembly must be in North America — and this must include critical minerals and battery components that meet requirements — to qualify for a clean vehicle tax credit of up to $7,500. There are further restrictions relating to vehicle price and a buyer's income.
After the government announced the new requirements under the Inflation Reduction Act, Tesla worked quickly to adjust its battery supply chain so that all of Tesla's Model 3 vehicles qualified for the federal tax credits, as reported by Reuters.
Even better news, if you live in California, you can double dip on the tax credit with both federal and state incentives of up to $7,500 each.
According to Tesla's website, a new Tesla Model 3 was $32,740 (as of mid-June) with the federal clean vehicle tax credit factored in. Subtract the additional California tax incentive of $7,500, and the price of a Model 3 may be reduced to $25,240, making the EV cheaper than a brand-new Toyota Camry (starting at $26,320, as of mid-June).
It's a significant milestone that brings the price of a high-tech EV like the Tesla Model 3 within reach of more consumers. Eventually, this financial accessibility may trigger a domino effect of positive impacts, from boosting EV adoption rates and cutting air pollution to accelerating our journey toward a greener future.
Are you curious if you and your next vehicle meet the requirements for a clean vehicle tax credit? Use this tool from the U.S. Department of Energy.
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