Tesla has recently released a memo to its employees that the base model Model 3 might lose access to EV incentives in the United States in the coming weeks. This could be a major blow to Tesla’s sales and could significantly limit consumers’ options for Electric vehicles that qualify for the federal tax credit.
Under the current regulations, to qualify for EV incentives in the U.S., an automaker must assemble the EV in North America. The proposed changes would also require that the vehicle’s batteries must be sourced domestically, which would make the standard range Model 3 ineligible. This is because the standard range Model 3 is assembled in the United States at the Fremont, California facility but receives its LFP batteries from China.
The higher-end variants of the Tesla Model 3 and Model Y both receive batteries made domestically, which would make them eligible for the tax credit, but it could be a different story for Tesla’s competitors. Many competitors receive their batteries from abroad, meaning that they will be ineligible for incentives until new battery production facilities are established and running. This could have a significant impact on the EV market growth in the U.S., as fewer consumers have access to EVs that qualify for the federal tax credit.
The potential changes have yet to be confirmed, but with the end of the quarter just around the corner, we likely won’t have to wait long to know for certain. In the meantime, Tesla is doing what it can to make sure that its EVs remain eligible for the federal tax credits and other incentive programs.