The tax credit for the Model 3 is believed to be dropping because it has battery components made in China
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by Brad Anderson
5 hours ago
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The Tesla Model 3 Rear-Wheel Drive and Model 3 Long Range will no longer be available with the full $7,500 federal EV tax credit from January 1, 2024, but rather only a $3,750 credit.
Tesla had foreshadowed that some versions of the Model 3 would see their tax credits cut in half from as early as July this year. It recently updated the order page for the EV to confirm that the credit will indeed be dropped by 50% and is encouraging interested buyers to purchase and take delivery of an eligible Model 3 before December 31 to get the full credit.
The company has also updated the order page for the Model Y and notes that while all variants are currently eligible for the $7,500 tax credit, reductions are “likely” after December 31.
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No specific reason has been given as to why the Model 3 Rear-Wheel Drive and Model 3 Long Range will no longer be eligible for the full credit. However, it is likely because their battery packs contain components from China, which the Biden administration states is a ‘foreign entity of concern’ (FEOC). From January 1, 2024, vehicles with battery components made or assembled in a FEOC will not be eligible for the full credit.
There’s little doubt that Tesla will be eager to deliver as many EVs this month as possible. It delivered 1,324,074 vehicles in the first three quarters of the year and has long intended to finish 2023 with 1.8 million Model 3s, Model Ys, Model Xs, and Model Ss being delivered. It’s too early to tell if the reduction in the tax credit will have a significant impact on Model 3 sales starting next year but we wouldn’t put it past Elon Musk to offset the smaller tax credit by simply cutting the price of the electric sedan.
