Tesla may be the best-selling brand of electric vehicles, but in California, its biggest market in the United States, the automaker’s products have become too expensive for customers to qualify for state rebates on non-polluting cars and trucks.
The states Clean Vehicle Rebate Project at the end of this month, updated its list of battery-powered vehicles eligible for direct rebates of up to $2,000, which previously included base versions of Tesla’s Model 3 sedan and the Model Y hatchback, the best-selling electric vehicles in California. But the rebates are only available for cars priced no more than $45,000 and crossovers that cost no more than $60,000. The program said that due to price increases that took effect March 15, “any Tesla Model 3 or Model Y ordered on or after March 16, 2022 is not eligible for a CVRP rebate.”
The cheapest Model 3 version is currently $46,990, down from $44,990, and over $50,000 after taxes and other fees. Add autopilot and company pilot controversial Full Self Driving package and the cost with taxes exceeds $60,000. A base Model Y version starts at $62,990, excluding taxes, and tops out at $83,000 for a longer-range version with the FSD package and other options.
CEO Elon Musk cited rising material and shipping prices in tweets on March 13, just ahead of Tesla’s widespread price hikes. “Tesla and SpaceX are seeing significant recent inflationary pressure in raw materials and logistics,” said the billionaire entrepreneur said. “And we are not alone.”
California is by far the first purchaser of electric vehicles in the United States, and the state has provided incentives for clean vehicles for decades. Its zero-emission vehicle credit program has also generated billions of dollars in free money for Tesla throughout the company’s history, which sells credits it doesn’t need to car makers and gas-powered trucks struggling to comply with state pollution rules.
Price limits on new electric vehicles, as well as annual income limits for buyers, went into effect this year to ensure California does not subsidize the purchases of wealthier customers, the core demographic of Tesla and others. other battery car companies. Still, losing the $2,000 rebate isn’t expected to dampen demand for Teslas in the Golden State, where strong demand for electric vehicles continues to rise. That’s because gasoline, which has skyrocketed since Russia invaded Ukraine a month ago, now costs an average of $5,913 a gallon, according to AAA.
Every electric model, including Tesla’s Model 3, Y, S and X, sold in California is still eligible for a separate state and utility-administered incentive that provides electric vehicle customers with a $750 off. (Tesla buyers stopped receiving a $7,500 federal tax credit after the company exceeded a sales volume limit for that incentive three years ago.)
Although Musk has said his goal is for Tesla to eventually sell electric vehicles at low prices, the company has made little headway on that front. Despite promising in 2014 that the Model 3 would start at $35,000, the company has been unable to achieve this goal consistently and it is unclear if any cars have ever been sold at this price. Tesla remains in luxury vehicle territory, with an average transaction price of $65,837 in February, according to Kelley’s Blue Book. That’s 43% more than the industry average of $46,085 for all new vehicles.
Musk has hinted that Tesla will eventually offer cheaper variants using cheaper lithium iron phosphate batteries, instead of the lithium-ion packs that now go in its vehicles. Cars with this power system will likely appear first in China, where LFP batteries are more readily available, although Tesla didn’t say when they might also be available in the United States. LFP batteries are heavier and less energy dense than lithium-ion, although they are also less prone to overheating and ignition.