Tesla released a vague warning about the potential for the $7,500 tax credit to be reduced on some of its electric vehicles starting next year.
Earlier this year, Tesla buyers regained access to the $7,500 federal tax credit for electric vehicles after losing it for years due to the 200,000-delivery limit per manufacturer.
It was due to a reform of the tax credit that removed the limit, but it also added new price limit and material sourcing restriction on the electric vehicles to be eligible.
All Model Ys have been eligible, all Model 3s except for the base version because it had Chinese battery cells, which makes it eligible to only half the credit, and Model S and Model X have been ineligible because of their high starting price.
Last month, Tesla surprised us by announcing that even the base Model 3 would now get the full tax credit.
Now Tesla warns that some models will “likely” see their federal tax credit reduced starting next year.
Tesla wrote in an email to owners today:
The $7,500 federal tax credit will likely decrease after December 31, 2023 for some models. New Model 3 and Model Y vehicles delivered by December 31, 2023 still qualify for the full credit.
The automaker also added this notice on its website:
Customers who take delivery of a qualified new Tesla and meet all federal requirements are eligible for a tax credit up to $7,500. Reductions likely after Dec 31.
In 2024, there are a few things that change for the electric vehicle federal tax credit. It is going to be available at the dealership rather than through a tax rebate.
The requirement for critical minerals in the battery having to been either recycled in the U.S. or extracted or processed there (or in any country that has a free trade agreement with the US) will go up from 40% to 50% of the materials.
Similarly, the battery component requirement goes up from 50 to 60% of components needing to be manufactured in the US or in any country that has a free trade agreement with the US.
If an electric vehicle doesn’t fulfill one of those requirements, buyers only have access to half of the credit ($3,750).
Tesla seems to be intentionally vague here and that’s self-serving. As far as buyers know, it could be any Tesla model that could lose the full credit, and that creates some urgency to buy.
We can’t help with clarity here since we don’t even know how Tesla gained the full tax credit on the base Model 3.
My guess would be that whatever happened there is going to be reversed and likely only the base Model 3 is going to be affected, but that’s just a guess.
Your guesses are welcomed in the comment section below.
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