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Tesla has informed customers that select variants of the Tesla Model 3 will no longer qualify for the $7,500 tax credit under the Inflation Reduction Act (IRA) starting in 2024. The affected models include the Rear-Wheel Drive (RWD) and Long Range variants.
“Tax credit will end for Model 3 Rear-Wheel Drive and Model 3 Long Range on Dec. 31, 2023, based on current view of new IRA guidance. Take delivery by Dec. 31 for full tax credit,” Tesla said in a notice on its website.
As of the latest information, the Tesla Model 3 RWD is priced at $38,990, while the Long Range variant comes in at $45,990. The Model 3 Performance, starting at $50,990 before options, appears unaffected by the change.
Inflation Reduction Act Changes
Tesla clarified that the eligibility for the IRA’s tax incentives is contingent on the new guidance provided by the IRA. This update comes in the wake of the Biden Administration’s proposal of a new IRA guidance, aiming to define eligibility rules for foreign entities of concern (FEOC).
John Podesta, White House Renewable Energy Adviser, highlighted the proposed guidance’s objective to bring clarity and certainty to U.S. automakers, battery manufacturers, and critical mineral producers. The intent is to encourage these industries to invest in diversified and resilient supply chains, supporting U.S. job growth and fostering an electric transportation future built domestically.
The U.S. government’s effort to limit the sourcing of electric vehicle (EV) battery materials and components from specific countries, notably China, is at the core of the new guidance. Deputy Energy Secretary David Turk emphasized that FEOCs are companies under the control or jurisdiction of the governments of covered nations, including North Korea, China, Russia, or Iran.
The IRA guidance imposes a price cap, covering optional equipment physically attached to the EV, with specific caps for different Tesla models: $55,000 for the Model 3, $80,000 for the Model Y, and $80,000 for the Model X.
This shift in tax credit eligibility for select Model 3 variants marks a strategic move by the U.S. government to incentivize resilient and diversified supply chains, with potential ramifications for Tesla and the broader EV market.
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