For years, the high cost of electric cars like Tesla has been a barrier that only the wealthy could overcome. However, recent price cuts have brought Tesla models within reach for the average car buyer. According to Canary Media, the tipping point on price parity has been reached, debunking the myth that Teslas are unaffordable.
New Price Points
Thanks to a series of price cuts, the basic Tesla Model Y now starts at $43,990 before federal and state rebates, taxes, and fees. The Model 3, on the other hand, is priced at $38,990 before any deductions, according to Tesla’s website. Both models are eligible for the full federal EV tax rebate, which brings down the effective price to $36,490 for the Model Y and $31,490 for the Model 3.
Andrew Krulewitz, founder of EV financing startup Zevvy, describes these prices as “silly cheap.” He points out that the average price of a new car in the US is around $45,000, making the Model Y’s price competitive even without rebates. Additionally, there are state and local incentives available in certain areas that can further reduce the cost of a new Tesla.
Changes in Tax Credit
Until now, the federal EV tax credit has been somewhat complicated. It favored cars priced below certain limits and had income guidelines. Furthermore, the battery materials and components had to be produced in North America or specific countries, and the vehicle had to have its final assembly in North America. Starting January 1, 2024, all of this changes.
As of that date, the federal EV tax credit will transform into a point-of-sale rebate that buyers can immediately utilize. Dealers will deduct the rebate from the sale price and get reimbursed by the IRS within 72 hours. This reform opens up the market for low- and moderate-income car buyers and fuels the Biden administration’s goal of having EVs make up half of new car sales by 2030.
According to new IRS regulations, consumers will have the option to transfer their clean vehicle credits, up to $7,500 for new vehicles and up to $4,000 for previously owned ones, to a car dealer starting January 1, 2024. This rebate will effectively lower the purchase price of the vehicle, providing an upfront down payment at the point of sale.
Moving Towards Mass Adoption
Tesla is not the only automaker offering affordable EV options. Several manufacturers sell electric cars priced below the average cost of a new car. However, limited availability can be an issue, as some manufacturers only sell their EVs in states that follow zero-emissions rules set forth by the California Air Resources Board.
As of the first half of 2023, electric vehicles accounted for more than 7% of new car sales in the US. This marks an important milestone, as experts believe that once 5% of new car sales are fully electric, the entire market will experience a transformative shift. This tipping point will significantly impact consumer preferences, leading to a rapid adoption of EVs.
The Future of the Automotive Market
The transition to electric cars brings about significant changes in the automotive industry. As Canary Media explains, the shift to EVs is both constructive in terms of cutting emissions but also disruptive to the traditional auto industry. This seismic change is causing market structures and supply chains to experience growing pains.
Despite predictions of its decline, Tesla continues to lead the EV market, outperforming established automakers like General Motors, Ford, and Volkswagen. Even after recent price cuts, Tesla’s profit numbers remain strong compared to its traditional counterparts. The only company keeping up with Tesla’s scale and EV growth is China’s BYD.
In the electric truck market, Rivian’s R1T electric truck is outselling Ford’s F-150 Lightning. Tesla’s long-awaited Cybertruck is also set to launch soon, following years of delays. Pickup trucks, in particular, are high-profit-margin products, as seen by the concessions made by GM to the UAW. These signs indicate the upcoming battle for dominance in the electric truck segment.
The transition to electric cars is not only changing the products themselves but also transforming manufacturing and vertical-integration strategies. Tesla has proven that the conventional car business’s manufacturing methods and corporate structures are not always suited for EV manufacturing. Legacy automakers will need to learn from Tesla’s trailblazing approach.
In conclusion, we are currently witnessing a rapid technological shift towards electric transportation. The EV transition is underway, and it is seemingly inevitable. As Canary Media states, we are living through the breakneck ride to electric transportation, and the race has just begun.
While some may question the impact of the upcoming point-of-sale rebate, it is expected that 2024 will be the year when EV sales surge. With electric cars now affordable and offering lower ownership and operating costs, the dam is about to break, and the EV revolution will continue to gain momentum.
