Tesla announces major changes to Model 3 tax incentives

Tesla has announced major changes to the tax incentives for the Model 3, which brings pricing down significantly.

Tesla said that all three trim levels of the Model 3 now qualify for the full tax credit of $7,500, as previously, the Model 3 Performance was the only vehicle that qualified for this amount. The Model 3 Rear-Wheel Drive and Model 3 Long Range both qualified for half the amount, $3,750.

It appears Tesla is reserving vehicles with China-made batteries for other markets. It recently started shipping Model Ys from China to Canada, which may have been a strategy for reserving as many vehicles for the U.S. market that would qualify for the full tax incentive.

Previously, the Model 3 RWD and Long Range equipped LFP prismatic cells built by CATL from China, which disqualified the vehicles for the full amount.

As a part of the Inflation Reduction Act, the Biden Administration has set aside North American-produced battery cells and vehicles for government tax credits.

The adjustments to the pricing via the tax credits bring the Model 3 RWD to just above $30,000, making it the most affordable Tesla vehicle. However, some local incentives would bring the cost of the Model 3 RWD below $30,000, making it one of the most affordable EVs on the market.

The Model 3 Long Range will now be well under $40,000.

However, these prices also include the potential savings that Tesla factors in, which includes other potential incentives and estimated gas savings of $2,400.

Tesla states that the qualifying vehicles must be purchased new.

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