Tesla expects its RWD Model 3 sedan will see a reduced tax credit eligibility by March 31, according to new guidance from the U.S. Treasury Department regarding battery component sourcing (via Reuters). The shift will come alongside updated requirements set to be released by the IRS on the same date.
The automaker updated its website on Wednesday evening to say, “This $7,500 credit is anticipated to be reduced for Model 3 Rear-Wheel Drive by March 31.”
Previously, the wording on the website read, “This $7,500 credit is in effect for deliveries taken before an update to the federal guidance, which Treasury and the IRS intend to issue no later than March 31, 2023.”
The news comes just a week after Tesla reportedly informed employees that the entry-level Model 3 would be losing its eligibility for the full U.S. tax credit for electric vehicles (EVs).
New guidance for the $7,500 EV tax credit requires that battery material sourcing and production must take place in North America or in countries with a free-trade agreement with the U.S.
The Tesla Model 3 Standard Range uses Lithium Iron-Phosphate (LFP) batteries from China to produce the vehicle at its Fremont, California plant. Deliveries taken prior to the new guidance’s issuance are still eligible for the full tax credit.
Still, the rest of Tesla’s lineup is expected to keep tax credit eligibility, with all of the automaker’s other cars using battery cells produced at the company’s Gigafactory Nevada.
The news also comes as some analysts expect strong delivery numbers from Tesla heading into the year’s second quarter, despite concerns about a looming recession.
Tesla Model 3 ‘Project Highland’ Spotted with New Wheels in the Wild [PICS] https://t.co/QmwKI3RA4N
— TeslaNorth.com (@RealTeslaNorth) February 23, 2023
