Tesla Model Y price subsidized by government that spends $200 million a month on EV tax credits

Tesla car prices are being subsidized by a US government that is spending nearly $200 a month on EV tax credits.

According to the Treasury Department that overseas the Inflation Reduction Act's EV subsidy program, the US has spent $580 million on it in the first quarter of the year.

More than 90% of eligible EV buyers with $150,000 income ($300,000 for those filing jointly), have taken advantage of the new point-of-sale EV tax credit reimbursement that went into force on January 1st.

There are now more than 13,000 dealers registered on the IRS Energy Credits Online portal to relay those advanced Treasury payments to EV buyers.

Until 2024, people had to wait for tax season to get the $7,500 in new EV tax credit back, but since the beginning of the year the subsidy can be applied by the dealer directly to the car price.

Tesla earns the lion's share of EV tax credits

Most of the US government subsidies for new or used electric vehicles are, needless to say, going to Tesla, which is America's biggest and most popular EV maker.

Global EV sales may be slowing, but Tesla is still number one, and in the US it holds a commanding market share. Tesla sells seven times more EVs than the second in the ranking, Ford, for instance.

Electric vehicle sales in the US

1. Tesla Q1 EV sales (US): 140,187 units
2. Ford Q1 EV sales (US): 20,223 units
3. Rivian Q1 EV sales (US):  13,558 units
4. Hyundai Q1 EV sales (US): 12,290 units
5. Mercedes Q1 EV sales (US): 12,250 units

Even if we took Hyundai and Kia (which sold 9,654 EVs last quarter) as a single entity, Tesla is still outselling all other EV makers in the US combined. Most of Tesla's sales, however, are of the Model Y, which fully qualifies for the subsidy.

All Tesla cars currently eligible for tax credit

• Model X Dual Motor: $7,500
• 2024 Model Y Rear-Wheel Drive: $7,500
• Model Y Long Range: $7,500
• Model Y Performance: $7,500

The Model Y was the world's bestselling car last year, but in the US its tax credit eligibility has made it truly irresistible to buyers. So much so that Tesla is now advertising a "Model Y starting at $37,490 after federal tax credit" directly.

Before Tesla dwindled its unsold Q1 inventory, the Model Y went for more than $15,000 off with inventory discounts, too, even though Tesla has raised inventory prices by a few thousand since.

A good chunk of the Model Y popularity and 96,729 sales in the US in Q1 can thus be directly attributed to the government's tax credit.

On the other hand, Tesla might have sold 3 times more Model Y than Model 3 units last quarter because the new Model 3 Highland refresh is not eligible for a tax credit discount, making it look expensive compared to the Model Y.

The bestselling electric vehicles in the US

1. Tesla Model Y: 96,729 units
2. Tesla Model 3: 30,842 units
3. Ford Mustang Mach-E: 9,589 units
4. Rivian R1S: 8,017 units
5. Ford F-150 Lightning: 7,743 units

To remedy this, Tesla is now trying to bring the production of the Model 3's Chinese batteries that make it ineligible for subsidies stateside, with plans for a new LFP cell factory.

Until then, the Model Y would earn the lion's share of the government's EV price subsidies that, at this rate, could surpass $2 billion this year alone.

Overall, Tesla is projected to earn $41 billion in car, battery, and charging infrastructure subsidies from the US government for the duration of the program that expires in 2032.

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