The $7,500 Inflation Reduction Act (IRA) Electric Vehicle tax credit will be available to Tesla’s Model 3 Rear-Wheel Drive (RWD) model for a little while longer than anticipated. The rear-wheel drive vehicle’s tax benefit was initially scheduled to expire on March 31. The revised rules, however, will now be made public on April 18, 2023. The revised guidelines will address the standards for battery manufacturing, assembly, and mineral sourcing, which will have an impact on which electric cars (EVs) qualify for full or partial credits.
The guidelines made public on January 1 have now been revised. According to the new guidelines, in order for an electric car to be eligible for the IRA tax credits, at least 50% of its battery parts must be manufactured and built in the US or in a nation with which it has free trade agreements. In addition, the US or a nation with which the US has a free trade agreement must supply at least 40% of the materials that go into an EV’s battery. By 2024, this ratio will have risen to 50%, increasing by 10% annually.
Influence on Eligibility for the Tesla Model 3 RWD Tax Incentive
The battery pack for Tesla’s Model 3 RWD was manufactured and put together in China using LFP cells from CATL, which do not adhere to the current battery sourcing recommendations. As a result, tax credits are ineligible for the Model 3 RWD. Without the tax credit, the present Tesla Model 3 RWD cost is $42,990. But, Tesla’s Model 3 Performance model, which comes with battery packs that are manufactured and put together domestically, will still be qualified for the full $7,500 in EV tax credits.
Fewer electric vehicles (EVs) will be eligible for credits as a result of the Treasury’s battery guidance, a US official told Reuters. When automakers modify their distribution networks to comply with the crucial mineral and battery part standards, the Biden administration anticipates that the adjustments to the tax credit will result in an increase in EV sales.
Extract, Process, and Recycle Compliance Definitions
The Treasury has outlined activities and processes linked to the extraction, processing, and recycle of battery components in order to ensure compliance with US battery sourcing recommendations. The regulations are a component of a $430 billion climate law that aims to lessen China’s EV batteries and solar panel reliance on the United States.
More Tesla, Ford, General Motors, and Volkswagen EVs are now eligible for up to $7,500 in tax credits thanks to a revision to the Treasury’s rules for what constitutes a car in February. Nevertheless, once the revised battery guidance goes into force, credits for some vehicles may start to drop.
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