Tesla shares (TSLA) are surging today, up as much as 4% in early trade and hitting highs not seen since early October of last year, as investor bullishness grows following news that all Model 3 sedans now qualify for the full federal electric vehicle tax credits. Tesla stock is on track for its 9th straight day of gains, its longest winning streak since January 2021.
Earlier this week Tesla announced on its website that all versions of the Model 3 sedan now qualify for the full federal EV tax credit of $7,500; previously the cheaper Model 3 Rear-Wheel Drive (RWD) version qualified for half the amount. The federal government confirmed the announcement on its fueleconomy.gov website.
The federal government’s requirements for the EV tax credit mandate that 40% of the critical minerals be extracted in the US or a country with a free trade agreement, and 50% of the value of the battery components must be manufactured or assembled in North America.
Though no reason was given for the change, it can be presumed Tesla updated where it was sourcing the materials for the Model 3 RWD batteries or where it has assembled the packs. Prior to the announcement, Tesla was reportedly using LFP (lithium ion phosphate) battery cells made by China’s CATL.
Nevertheless, inclusion of the full federal tax credit means the Tesla Model 3 RWD now costs $32,740 if buyers meet criteria including income restrictions and MSRP caps ($55,000 for cars; $80,000 for trucks and SUVs).
While $32,740 is a relative deal in a new car market where the average price is around $45,000, more incentives can be had on EVs like the Model 3 that pull prices even lower. New York state offers up to $2,000 off EVs via its Drive Clean Rebate for which the Model 3 qualifies.
In California, the state offers an even bigger incentive — a $7,500 tax rebate that depends on income and other requirements. Inclusion of both the federal and California state incentives drops the Model 3 down to $25,240 – which Reuters notes is below the cost of a new Toyota Camry (starting price $26,320).
Furthermore, 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, meaning the price for this car including all tax incentives drops it to an astounding $22,830 if the buyer meets all eligibility requirements.
Tesla investors and analysts are looking for its gen-3 vehicle platform to open up a whole new market of middle class and younger buyers to EVs. It turns out some of those buyers, especially in California, could get a Tesla on the cheap right now – at least while incentives last.
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Pras Subramanian is a reporter for Yahoo Finance. You can follow him on Twitter and on Instagram.
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