Sources familiar with the matter have told Electrek that Tesla has communicated to its employees that it expects to lose the full $7,500 federal tax credit on its cheapest electric car, the Model 3 Standard Range. This is due to the fact that the battery pack for this vehicle uses LFP battery cells built in China, which does not meet the requirements for battery production in North America and battery material sourcing in countries with free trade agreements with the US in order to access the tax credit.
It’s worth noting that this expectation has not yet been officially confirmed, as the IRS has not yet released detailed guidance on how the new tax credit program’s requirements will be accounted for. However, Tesla is reportedly preparing buyers of the Model 3 Standard Range for the potential change in access to the tax credit, as delivery after March 31 could mean the vehicle is not eligible for the credit.
As for Tesla’s other Model Y and Model 3 vehicles in the US, they are expected to retain access to the full tax credit as they use battery cells built by Tesla or Panasonic in Nevada, California, or Texas. Tesla is reportedly confident that the sourcing of its battery materials will not be an issue, as a large percentage of them come from countries with free trade agreements like Australia and Canada.
Overall, this development underscores the challenges that automakers face as they navigate the rapidly evolving landscape of electric vehicle incentives and regulations. While the new tax credit program has been a boon for many electric automakers, it appears that Tesla may not be able to fully benefit due to the sourcing of its battery cells. Nonetheless, Tesla remains a major player in the electric vehicle market and is likely to continue to innovate and expand its offerings in the years to come.
