Losing Tax Credit as Batteries are Made in China: Because the batteries are made in China, Tesla informed staff that it anticipates losing the entire $7,500 federal tax credit on its most affordable electric vehicle.
Since the new federal tax incentive programme for electric vehicles went into effect in January, certain electric automakers have seen a rise in demand. Since its buyers fully lost access to the tax credit years ago after the company reached 200,000 deliveries in the US, Tesla has been the largest gain.
The Model 3 and Model Y, the automaker’s two most affordable and well-liked versions, have both been eligible for a $7,500 tax credit for the past three months in the US. Yet, we anticipated that by the end of March, things would have changed.
In order to be eligible for up to half of the $7,500 credit, the new tax credit programme would include specifications for battery manufacturing in North America and battery components sourcing in nations with free-trade pacts with the US.
Nevertheless, the instructions on how to implement these requirements were not made available in time for the newly implemented tax credit to take effect in January, thus they were postponed only until second quarter. By then, it had been anticipated that the IRS will provide comprehensive instructions on how such criteria will be taken into account.
Model 3 Standard Range to lose full tax credit
We have now learned from sources with knowledge of the situation that Tesla has informed staff that it anticipates the IRS to release the guidance at any moment and that the automaker anticipates losing the full credit on the Model 3 Standard Range, its most affordable model.
The battery pack of the Model 3 Standard Range is made in the US city of Fremont from LFP battery cells produced in China.
The announcement to staff members seems to have been made to inform them that access to the entire credit may vary if delivery is made on April 1 as opposed to March 31 – pending official advice. In the US, Tesla’s other Model Y and Model 3 vehicles are anticipated to continue to be eligible for the full tax credit because their batteries were produced in Texas, Nevada, or California by Panasonic or Tesla.
As a large portion of its battery materials come from nations with free-trade pacts like Australia and Canada, the sourcing of battery materials could be more problematic, but Tesla seems confident that this won’t be the case.