Tesla's Model 3 RWD EV Tax Credits to Take a Hit

Attention car enthusiasts! Tesla's Model 3 RWD is about to face a major blow to its EV tax credits. Tesla has officially announced that the $7,500 tax credit on Model 3 RWD will be reduced by the end of March. The root cause for this reduction is the US Treasury's battery guidance for the Inflation Reduction Act's EV tax credits.

The Treasury Department's upcoming battery guidance for EV tax credit qualifications is set to cover essential aspects like battery production, assembly, and mineral sourcing requirements. According to a US official, once the battery guidance comes into effect, many EVs will not qualify for full or partial credits.

Tesla's Model 3 RWD is manufactured in China, where the battery pack is assembled and produced, affecting its qualification for the IRA's $7,500 EV tax credits. The Treasury's battery guidance requires at least 50% of EV battery components to be produced and assembled in the US or in a country with a free trade agreement.

The utilization of CATL's LFP cells from China in the battery pack of the Model 3 RWD has rendered it ineligible for credits as per the battery sourcing guidance. This is due to the requirement that at least 40% of the minerals utilized in an EV's battery must be sourced in the US or a country that shares a free trade agreement with the US.

Presently, the Tesla Model 3 RWD is being sold at a price of $42,990, which does not include the $7,500 tax credit offered by the IRA. On the other hand, the Model 3 Long Range and Performance models from Tesla are still eligible for the full $7,500 EV tax credits since they are equipped with battery packs that are domestically produced and assembled.