Tesla has updated its US Model 3 purchasing page, suggesting a change in the government tax credit for the electric car.
The Inflation Reduction Act of 2022 (IRA) provides a $7,500 federal tax credit for all Model 3 and Model Y variations, per Inside EVs. Tesla's website indicates that after December 31, 2023, the Model 3's federal tax credit may be reduced.
The car manufacturer, though, needs to make clear the cause of the tax credit decline or if it applies to all Model 3 variations or just a few. Moreover, Model Y has yet to be covered by this information on Tesla's website.
The US electric vehicle (EV) sector saw substantial changes due to the Inflation Reduction Act (IRA), with Tesla as the primary beneficiary. The maximum $7,500 tax credit allowed under the IRA now applies to all Model 3 and Model Y variations made by Tesla.
Challenge for the EV Industry
Other manufacturers, such as GM found it challenging to create enough electric cars to fully take advantage of these incentives, even though their EVs qualified for the tax credit.
Ford was also dealing with an overabundance of products filling up dealer lots across the country. Insiders blame Tesla's price reductions and alleged poor dealer procedures for the weak sales.
The scenario may change next year, according to Electrek. For qualified purchasers, it's good news that the tax credit will now be available at the moment of sale rather than during tax filing. This change lowers the price of electric cars by turning the tax credit into a one-time discount.
As Tesla stands to gain much more if the market situation continues to be positive, the tax credit amount may not be uniform across all Tesla automobiles.
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Since Tesla has not explained the predicted fall in the Model 3 tax credit for the next year, some have hypothesized that it may be a sales strategy to boost Model 3 sales. This supposition acquires credibility in light of Tesla's upcoming rollout of the updated Model 3 this fall. However, Tesla does not influence another aspect that affects the tax credit amount.
What To Expect in 2024?
There will be several modifications to the federal tax credit for electric cars in 2024. Instead of being offered as a tax refund, the credit will be accessible at the dealership. The amount of battery-making minerals collected or processed in the US or a free trade agreement country will climb from 40 to 50 percent, per Autoevolution.
The minimum percentage of battery components made in the US or countries with free trade agreements will increase from 50% to 60%.
Buyers will get half the tax credit if an electric vehicle doesn't meet these requirements ($3,750).
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