Tesla will restore the electric vehicle tax credit in 2023 — but it may not need it

Cybertruck may be a different story.

“There will be good competition from the Rivian R1T, [Ford] F-150 Lightning, [Chevrolet] Silverado EV and [GMC] McDonald’s Hummer EV said: Combined with Musk’s recent announcement that it will cost more than he originally promised, Tesla will likely do what it needs to qualify for at least $3,750.

One of Tesla’s advantages under the new law is that it already has a North American battery supply base.

The automaker has a joint venture with Panasonic Corporation of Nevada to manufacture cylindrical cells for its U.S.-made cars. This facility opened in 2016. Tesla is now ramping up its battery production lines near its factory in Fremont, California, and inside its new factory in Austin, Texas. Panasonic announced that it will build a battery factory in Kansas.

The new electric vehicle tax credit sourcing requirements, which are complex and will get tougher in the coming years, are designed to push automakers to build their cars and batteries in North America and source battery materials locally or through free trade partners. These trading partners include Australia and mineral-rich Chile.

The goal of the inflation-control law is, in part, to reduce China’s dominance of the global battery supply chain.

“At this time, it appears that Tesla models with Nevada-assembled battery packs should be eligible for at least half of the full credit,” said Ed Kim, president and chief analyst at AutoPacific.

“Due to the US-South Korea Free Trade Agreement, some Tesla models that use LG cells may be eligible for more if the content of these cells is sufficient from South Korea. But at this time, the US content in Tesla is the same,” Kim said, referring to LG Energy Solutions Battery Manufacturer, The supply chain for batteries is unknown to us.

According to consultancy E Source, Tesla will likely be the first automaker to sell electric vehicles that is eligible for a full $7,500 tax credit, starting around mid-2024. eSource said its forecast is based on “current OEM manufacturing strategies and information contained in the Inflation Reduction Act.”

Ford, GM and GM partner Honda will likely qualify for full credit a year later, according to E Source forecasts.

Hyundai, Rivian, Volkswagen and Volvo could follow suit in 2026. And Tesla’s luxury rivals like Mercedes, BMW and Lexus may not qualify until the latter part of the decade.

E Source did not provide predictions about when automakers might qualify for partial credit.

The new EV support also comes with a maximum buyer income of $150,000 for a single deposit and $300,000 for a joint deposit. For higher quality vehicles, these may be the main exclusion factors rather than battery sources.

Tesla’s Model S sedan and Model X crossover, with starting prices at $100,000, are in short supply without the current tax credit and won’t be eligible for the new one.

“The truth is that Tesla sells everyone without the tax credit,” MacDonald said. “Essentially, the market said the tax credit is not that important.”

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