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Elon Musk famously railed against the IRS back in January for classifying Tesla’s 5-seat version of the Model Y as a sedan, thereby imposing negative tax credit implications. At the time, Musk had claimed that the variant was too “mass efficient” for IRS’ sensibilities. However, it seems that the real threat was in relation to Tesla’s bread and butter – the Model 3.
As a refresher, the Biden administration’s Inflation Reduction Act has reintroduced a $7,500 federal tax credit on the purchase of electric vehicles. The snippets above detail the various requirements that the tax credit entails, including an upper limit on personal/household income, gross vehicle weight rating of less than 14,000 pounds, a hard-coded requirement of final assembly in North America, and a price ceiling of $80,000 for electric SUVs and pickup trucks and $55,000 for electric sedans.
This brings us to the subject matter of today’s post. Electrek is now reporting that Tesla has communicated to its employees that it expects to lose the $7,500 tax credit on the Model 3 amid continuing revisions and clarifications to the battery production and material sourcing guidelines from the IRS. The Standard Range (SR) Model 3 is built in Fremont, California, but its LFP battery packs are sourced from China.
Bear in mind that other variants of the Model 3, as well as Model Y, appear to still qualify for the tax credit as their battery packs are built by Tesla or Panasonic in the US.
Nonetheless, the exclusion of Model 3 SR from this crucial federal incentive will dent the version’s demand as its effective price will increase by 21 percent on the 31st of March once the one-time exemption expires.
In early March, Tesla reduced the base price of its Model S by 5.3 percent and that of Model X by 9.1 percent in the US. Moreover, following material price cuts, the Plaid versions of both models are now priced at $109,990. Tesla has already discounted the price of its Model 3 and Model Y EVs by around 20 percent. These aggressive price cuts have allowed the company the opportunity to revive the delivery momentum that it had lost toward the end of last year.
Umm … the banks are melting
— Elon Musk (@elonmusk) March 23, 2023
Meanwhile, Elon Musk appears to be spending a lot of time trolling President Biden on Twitter. In the latest such attempt, Musk took umbrage with Biden’s portrayal of climate-related initiatives, tweeting that the nation’s “banks are melting.” This is a reference to the ongoing deposit flight from mid-sized banks to those that are deemed “too big to fail.”
