Tesla lowered prices on some of its cars Thursday night. The price cuts come, in part, to keep up with changes to federal electric vehicle (EV) tax credits.
A new federal law made many Tesla products eligible for a $7,500 federal tax rebate on Jan. 1. But the way the government carries out the law is changing.
Tax Credit Rules Change April 18
Beginning Jan. 1, the law allowed Americans to take the full tax credit on most EVs built in North America. Hundreds of thousands of Americans have taken advantage of the credit since then.
But the situation grows more complex on April 18. That day, the tax credit splits into two parts. Only cars assembled in North America qualify at all. A car qualifies for half the credit if at least 50% of its battery is assembled in North America.
Related: How Do Electric Car Tax Credits Work?
To qualify for the other half, at least 40% of the minerals used in that battery must have been mined in the U.S. or a list of trade partners. The list excludes China.
Those requirements – for battery assembly and mineral origination – will increase yearly until reaching 80% in 2027.
The IRS will publish a list of cars that meet the new requirements on April 18. The automotive industry has warned that few cars will qualify. Buyers can still apply the credit if they can take possession of a new car before that date.
The IRS hasn’t said which vehicles will qualify. But Tesla has updated its website with a prediction that some of its cars will still get the full tax credit after the 18th. Others will not. The company has cut some prices accordingly, but not enough to make up the difference.
Even Models That Keep Tax Credits Get Price Cuts
The base Model 3, for example, will lose half the credit, Tesla says. The company cut its entry price overnight by $1,000 to $41,990. Tesla also charges $1,390 to deliver the car.
The company also dropped the cost of the Model 3 Performance by $1,000 to $52,990. That model uses a different battery. Tesla’s order page says that only the base Model 3 will lose part of its tax credit.
Tesla says all Model Y SUVs will still qualify for the full federal tax credit after April 18. It cut the price of the Model Y’s Long Range and Performance versions by $2,000 each.
Tesla also cut prices on its Model S sedan and Model X SUV. Neither of those qualifies for any federal tax credit due to price caps.
The New Prices
| Vehicle | New price |
| Model 3 | $41,990 |
| Model 3 Performance | $52,990 |
| Model Y | $49,990 |
| Model Y Long Range | $52,990 |
| Model Y Performance | $56,990 |
| Model S | $84,990 |
| Model S Plaid | $104,990 |
| Model X | $94,990 |
| Model X Plaid | $104,990 |
