Tesla has reportedly warned buyers the company’s cars may not qualify for a federal tax credit next year. The credit reduces the effective purchase price of the Model 3 sedan and Model Y SUV by $7,500.
However, Electrek reports Tesla sent an email to current owners this week warning that “The $7,500 federal tax credit will likely decrease after December 31, 2023 for some models.” The company goes on to say that “reductions are likely” on that date.
Battery Requirements Change Every Year
The wording of the warning could be misleading. The federal government has done nothing to decrease its electric vehicle (EV) tax incentives. But Tesla is right that the list of cars eligible for the credits will change on Jan. 1, 2024.
Related: How Do Electric Car Tax Credits Work?
The law that created the credits has several requirements. Some will not change next year, such as price caps and a requirement that cars be assembled in North America.
Others, however, grow more stringent every year.
In 2023, a car must have at least 50% of its battery assembled in North America to qualify. In 2024, that ladders up to 60%.
To qualify in 2023, at least 40% of certain critical minerals in a car’s battery must originate in the U.S. or certain partner countries. That requirement also changes next year, rising to 50%.
Tesla’s letter does not explain why the company expects some cars to be ineligible next year. But failing one or both of those thresholds might explain it.
The List of Qualifying Cars Changes Constantly
Whatever the explanation, it illustrates a lesson for EV shoppers – the list of cars that qualify for tax credits shifts regularly. It’s likely to shift again in early 2024.
Automakers might use the changing requirements to push buyers to move quickly on a purchase. But shoppers should remember that automakers are constantly shifting their global supply lines to comply with the law. Cars could lose access to the discounts as they grow more stringent. They could also gain access as companies buy minerals from new suppliers and new battery factories open.
Suppliers change all the time. At one point earlier this year, some Model 3 trim levels qualified for the full discount, and others didn’t because each trim level used different batteries. That changed, and Tesla never explained why.
We’d love to tell you how to time your purchase to ensure you get the maximum discount. But every aspect of the rebate system is now a moving target. We’ll update you on the shifting list of qualifying cars as it evolves.
