Tesla reports some Model 3 EVs to lose $7,500 consumer tax credit on December 31 due to new IRA guidance; tax credits created to encourage North American sourcing or assembly of battery components

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December 13, 2023 (press release) –

Tesla's Model 3 Rear-Wheel Drive and Long Range vehicles will lose an up to $7,500 federal tax credit from Dec. 31 based on new guidance under the U.S. Inflation Reduction Act, a message on the U.S automaker's website showed late Tuesday.

The U.S. Treasury issued guidelines earlier this month detailing new battery sourcing restrictions that take effect Jan. 1 aimed at weaning the U.S. electric vehicle supply chain away from China.

"Tax credit will end for Model 3 Rear-Wheel Drive and Model 3 Long Range on Dec. 31, 2023 based on current view of new IRA guidance. Take delivery by Dec. 31 for full tax credit," the company said in a notice on its website.

Tesla did not immediately respond to a Reuters' request for comment.

In April, the Treasury said new guidelines will slash the credits for the EV maker's Model 3 RWD by half to $3,750 but that other Tesla models will retain the entire benefit.

In July, Tesla said the $7,500 federal tax credits for its Model 3 electric vehicles are likely to be reduced after Dec. 31, without elaborating on the reason.

The U.S. EV credit currently requires 50% of the value of battery components to be produced or assembled in North America to qualify for $3,750 of the credit and 40% of the value of critical minerals sourced from the United States or a country with which it has a free trade agreement.

Other carmakers such as Ford and GM expect to qualify for the entire tax credits for many of their EVs from next year, while Volkswagen remains 'cautiously optimistic'.

(Reporting by Urvi Dugar in Bengaluru, Editing by Louise Heavens)

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