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EV Tax Credit Has Saved Buyers $1 Billion in 2024

Buyers of electric vehicles have saved more than $1 billion this year using an upfront tax credit discount contained in the federal Inflation Reduction Act.

The U.S. Department of the Treasury recently announced the $1 billion milestone on the purchase of more than 150,000 clean vehicles since it took effect on Jan. 1. This translates to owners saving $1,750 annually on fuel and maintenance costs. Over a projected 15-year lifespan of the vehicle, owners will save between $18,000 and $24,000 compared to a comparable gas vehicle, the Treasury Department said.

The Inflation Reduction Act of 2022 included incentives and funding to move forward various clean energy initiatives, including clean vehicles.

In 2023, about 1.5 million clean vehicles, defined as battery electric, fuel cell, or plug-in hybrid, were sold in the U.S., which is a 50% increase from 2022, and the highest amount ever. The number of electric vehicles on the road in the U.S. is expected to continue to increase in the coming years, and will account for between 13% and 29% of new vehicle sales by 2050, the U.S. Energy Information Administration projects. That growth will be driven by lower component costs and federal and state policies that provide incentives for EV purchases.

EVs are also expected to make up about half of global car sales by 2035. EV sales globally will soar to about 73 million in 2040, up from around 2 million in 2020, rising to 61% from 2% of total vehicle sales during that span. The share of EV sales is anticipated to be well over 80% in many developed countries, a Goldman Sachs report indicates.

The Inflation Reduction Act created a way for the clean vehicle purchase credit of up to $7,500 for new cars and $4,000 for used cars to be transferred to car dealers so it can be applied to the upfront purchase price rather than when buyers file their taxes. It has proved to be very popular, being used in more than 90% of new car and 80% of used car purchases.

While most of the savings from owning a clean vehicle are from the cost of fuel, maintenance costs are also typically 40% lower for EVs than gas-powered vehicles.

The trend toward EVs is expected accelerate in the coming years, as improved technology and lower costs make them more attractive to buyers. The International Energy Agency projects that global EV sales could hit 17 million in 2024, with more than one in five cars sold worldwide being electric.

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