Cheapest Tesla Model 3 Might Soon Lose Eligibility For US Tax Credit

Image Credit: Head Topics According to reports, Tesla warned staff that its least-cost EV would soon be ineligible for the recently revised US federal EV tax credit. This is due to the fact that the least expensive Model 3 uses batteries with different chemicals that are sourced and produced in China. A new US EV tax credit went into effect at the start of the new year. As a result of the new credit's stringent requirements for the procurement and manufacture of battery materials, it was anticipated that almost no EVs in the US would be eligible. It is functioning as intended to encourage manufacturers to produce electric vehicles and their batteries in the US using domestic resources. Just after 2023 arrived, the US Treasury declared that their advise on the battery production and material standards wasn't yet complete. As a result, almost all EVs in the US are eligible for the credit thanks to a form of "loophole." In April 2023, the new regulations are anticipated to go into effect formally. In 2023, Tesla dramatically lowered its pricing in order to increase demand, spur price competition, and make sure that more of its electric vehicles would, at least temporarily, be eligible for the new credit. Tesla has been able to benefit from the credit because to the lower pricing and some changes the government has made to the credit language. Nevertheless, the rear-wheel-drive Model 3 "Standard Range," the US EV manufacturer's most affordable vehicle, is outfitted with lithium iron phosphate (LFP) battery cells that Tesla imports from China. Although the manufacturer did specify that the batteries will be used in the lowest versions, none of its other American EVs utilize them, thus if the Model Y RWD Standard Range was offered here, it would probably use the same batteries as the least expensive Model 3. Whatever the case, individuals with knowledge of the matter told Electrek that Tesla anticipates the IRS will issue the revised guidelines in the upcoming days, rendering the Model 3 with the LFP batteries ineligible for the credit. The only current Model 3 with a battery pack made in China is the basic Model 3, which is constructed in the US like all other Tesla vehicles. Although we'll have to wait for formal battery materials rules from the US Treasury to know for sure since not all the materials are acquired locally, the automaker's other vehicles should continue to be eligible for the credit given their batteries are made domestically.