Electric vehicles have long been thought of as the future of the automotive industry. As competition and federal incentives have made EVs much more affordable, it's safe to say the future is now.

The tipping point for when electric vehicles become as cheap as, or cheaper than cars with internal combustion engines could arrive this year for some mass-market models and this is already the case for some luxury vehicles.

Chevrolet, Hyundai, and Nissan all lowered prices on their entry-level models, and Tesla recently cut its prices by $3,000 to $19,000 across its model line. By cutting prices, automakers increased the number of models that could benefit from government tax credits allowed by the Inflation Reduction Act.

The legislation passed by Democrats in Congress last year provides tax credits of up to $7,500 for electric car buyers. To qualify, battery-powered or plug-in hybrid sedans have to sell for less than $55,000, while pickups and SUVs qualify only if the retail price is below $80,000.

Consumers interested in purchasing a Tesla will now find that the Model 3 price has dropped $3,000 for the base version, for a $43,990 starting price, and $9,000 for the Model 3 Performance, which now stickers for $53,990. Other Teslas have seen even larger price reductions.

"These price cuts bring Tesla prices back down to about where they were back in 2021 before the supply chain crisis rapidly drove up the prices of all vehicles," Chris Harto, a senior policy analyst for transportation and energy told Consumer Reports. "Hopefully this is indicative of a car market that's beginning to return to normal."

Along with the tax credit, the Inflation Reduction Act created significant subsidies for companies that manufacture batteries in the United States, as part of a concerted effort by the Biden administration to establish a domestic supply chain and reduce Chinese reliance.

The subsidies could cut the cost of making electric vehicles by as much as $9,000, helping EVs achieve price parity with gasoline cars as soon as the end of this year.

As Tesla, General Motors, Ford Motor, and their battery suppliers ramp up new factories and benefit from the cost-saving measures that mass production allows, new electric vehicles from companies like Volkswagen, Nissan, and Hyundai are set to hit the market and increase competition.

This latest crop of electric vehicles will come in around $45,000—like the Hyundai Ioniq 5 and Volkswagen ID.4. The Nissan Leaf dropped from $31,670 to $27,400 for 2022 and was the most affordable EV on the market until Chevrolet took away that distinction in 2023 with its reduced-price Bolt and Bolt EUV.

When factoring in charging costs, maintenance, and initial purchase price, EVs typically outpace their gasoline counterparts in the long run. When consumers take advantage of the federal tax credits, all signs point to the continued viability of EVs as practical alternatives to standard combustion.

Tesla U.S.