Tesla has officially confirmed a 50% reduction in the $7,500 federal tax credit on two Model 3 trims starting next year. Since the 2023 reform of the electric vehicle incentive program, buyers of all Model 3 vehicles have had access to the tax credit, contingent on individual eligibility based on income. However, changes in eligibility criteria for electric vehicles, including factors such as price and source of components, are now in effect.
Tesla has indicated that the evolving criteria, particularly related to battery materials, are becoming more stringent each year, with an emphasis on incorporating batteries and materials produced in North America. As a result, the automaker expects to lose a portion of the tax credit on specific Model 3 models starting in 2024.
In an overnight update to its online design studio, Tesla specified that the Model 3 Rear-Wheel-Drive and Model 3 Long Range trims will see their tax credit reduced to $3,750 as of January 1, 2024. The announcement also notes that customers taking delivery of a qualified new Tesla and meeting all federal requirements can avail themselves of a tax credit up to $7,500. It further emphasizes the importance of taking delivery by December 31, 2023, to receive the full tax credit, applicable only for eligible cash or loan purchases.
While Tesla did not elaborate on the reasons behind the reduction in tax credits for these models, it is speculated to be related to the origin of certain battery components.
Additionally, the update highlights that the tax credit will now be available as a “point-of-sale” incentive, allowing for direct application at the vehicle purchase rather than being returned as a tax credit.
