Tesla has sounded the alarm bells once again regarding the potential reduction in the federal tax credit. As the year-end approaches, potential buyers may want to make a decision and possibly save some money, as there may be a significant impact on the final price tag of their electric car.
The December Dilemma
The order page for the Model 3 now states:
All new Model 3 vehicles currently qualify for a federal tax credit for eligible buyers. $7,500 tax credit expected to reduce to $3,750 on Dec 31, pending federal guidance. Take delivery to guarantee full incentive.
Changes to the Tax Credit
The 2024 tax credit's eligibility criteria will tighten. Specifically, the requirement for critical minerals used in batteries, such as those extracted or recycled within the U.S. (or nations with a U.S. free trade agreement), will increase from 40% to 50%. Furthermore, the mandate for battery components will also intensify, with 60% of these components needing domestic manufacturing or production within free trade agreement nations. Vehicles that don't meet these more stringent guidelines will only access half the credit, $3,750 USD.
A Flashback to July's Warning
We've heard the warning before. In July, Tesla made a somewhat ambiguous warning about the impending decrease of the coveted $7,500 tax credit on some of its vehicle models. Back then, while all Model Ys were eligible for the full credit, the base version of the Model 3 faced a restriction due to its use of Chinese battery cells. This particular battery choice made it eligible for just half the credit. The higher-end models, Model S and Model X, didn't qualify because of their premium pricing. In an exciting twist, Tesla announced that even the base Model 3 would be eligible for the full tax credit.
The Highland is Coming
Fast forward to the present, Tesla is again cautioning its consumers. It is worth noting that Tesla plans to roll out the new Model 3 Highland to North America in 2024. While it hasn't reached the U.S. shores yet, this development could be strategic. Clearing out stocks of the older design Model 3s before the Highland's U.S. debut could be why Tesla urges consumers to capitalize on the current tax incentives by taking delivery soon.
Also, Tesla missed its third-quarter projections. There are plenty of valid reasons behind having fewer deliveries. However, the point remains that the numbers were down. If we have learned anything about Elon Musk over the years, he likes to show constant improvement. We saw this late last year when Tesla rolled out some significant price decreases as the end of the year approached.
As we venture into 2024, some pivotal shifts are expected in the electric vehicle federal tax credit framework. The most notable change is the point of access - it will transition from a tax rebate to an immediate discount at the dealership.
Tesla reiterates concerns about the potential tax credit reduction, and prospective buyers must be proactive. The clock is ticking, and decisions made in the next few months could save some cash or be a moot point.
