Tesla has announced significant price reductions throughout its lineup of vehicles. The importance of these reductions might have a significant impact on both the increasingly competitive EV market and Tesla's brand. Even as automakers struggle to find enough materials to put these cars on the road in sufficient numbers, some even claimed that this could be the opening shot in a potential EV price war.
The EV market has undergone big changes. A surge of additional EV choices will hit the market in 2023, but since most manufacturers will only be able to produce a certain number of units, Tesla is positioning itself to attract buyers who are impatient. This news is likely to make many new Tesla customers extremely delighted. The Model 3 Performance, for instance, fell from over $63,000 to $54,000 in the US before tax credits. Even without tax subsidies, the Model Y Performance has decreased in price from around $70,000 to roughly $57,000.
Tesla Model 3
Due to more affordable prices, specific Model 3 and Model Y configurations, which are frequently among the top selling EVs in the US, should now qualify for further savings of up to $7,500 thanks to the updated federal EV tax credits. The price reductions follow a comparable action last week in China. As it competes with domestic automakers like BYD for EV supremacy, Tesla lowered its rates there by as much as 13 percent. This is the third time in recent months that it has done so.
The Lowdown on USA EV Tax Credits
The action in the United States was coordinated with modifications to the EV tax credit made possible by the Inflation Reduction Act, which now offers tax incentives for EVs and batteries made in the US.
If you and the electric vehicle model you desire are both eligible, the EV tax credit system is willing to throw $7,500 your way to make it happen. On January 1st, there were significant changes made to the tax credits available for buying electric cars. Although EV tax credits have been around for a while, they underwent a revision as part of the large climate legislation that President Biden signed into law last year. And as a result, they become more complicated. A car that is qualified now might receive nothing in March if the rules change once more, which only serves to increase the confusion.
When compared to an earlier iteration of the credit, the list of automobiles that qualify for the $7,500 federal tax credit has undergone modifications. Popular Chevy Bolts, Tesla Model 3 and Model Y models are now eligible, but many other cars, including the pricey Lucid Air or the Kia EV6, are not.
Additionally, the new climate law increased the tax credit's income caps to a household's maximum of $300,000, an individual's maximum of $150,000, or a head of household's maximum of $225,000. That's a large sum of money, but because electric cars are so pricey, many potential purchasers will be turned off.
In fact, several vehicles that are listed as possibly qualifying for a credit on the IRS website now do not qualify because of their high price.
Vehicles must also be produced in the US. As a result, some cars, including the Kia EV6 and Hyundai Ioniq, are currently ineligible for purchase credit. Some need investigation, like the Volkswagen ID.4. Since certain ID.4s were produced in Germany, they are not eligible for a credit. However, if you're considering one manufactured in Chattanooga, it qualifies.
The IRS explained in late December that motor vehicles leased to consumers may be eligible for a tax credit that is much, much simpler to qualify for. There are no income restrictions, no price ceilings on cars, and no requirements that they be built in the United States. Companies are not compelled to pass the savings on to customers; the credit goes to the firm leasing the car, not the individual driving it. However, the tax credit has operated in this manner for some time, and businesses often pass the savings forwards to customers.