Tesla Model 3 Variants to Lose their Tax Subsidies

Tesla Model 3 Variants to Lose their Tax Subsidies


Tesla Model 3 Variants to Lose their Tax Subsidies

­EV tax subsidies are about to change dramatically, and Tesla in particular will feel the squeeze. Starting in 2024, the Tesla Model 3 with rear-wheel drive and the all-wheel drive Long Range variant will no longer qualify for federal subsidies.

Our “Final Thought” for the forthcoming January issue discusses this massive EV paradigm shift – in an attempt to (indirectly) force China out of the EV market, any vehicles with batteries, minerals, and components sourced from the People’s Republic will no longer be eligible for tax subsidies.

It works on a sliding scale, with the $3,750 tax credit requiring 60% of the value of the battery components be manufactured or assembled in North America, and the full $7,500 credit carrying more draconian prerequisites.

And while Tesla initially assumed new legislation would cut the tax credit for the Tesla RWD and AWD in half, they’re now acknowledging the subsidies will disappear completely.

Their website now reads “All new Model 3 vehicles currently qualify for a federal tax credit for eligible buyers. $7,500 tax credit will end for Model 3 Rear-Wheel Drive and Model 3 Long Range on Dec 31, 2023. Take delivery by Dec 31 for full tax credit.”

And yes, this seems like a prototypical scarcity sales technique (and that’s almost certainly a corollary effect), but the Model 3 definitely isn’t the only vehicle losing its tax subsidies.

Incidentally, I mention in January’s Final Thought how the new tax legislation could both hurt China and slow down domestic EV proliferation. Given that the Model 3 is amongst the top 3 best-selling EVs in the U.S., suddenly removing a large tax subsidy could have a dramatic butterfly effect on the EV market.