US: All Tesla Model 3s qualify for $7,500 federal tax credit now

The entry level version effectively starts at under $35,000.

Tesla just implemented a very groundbreaking update to its Model 3 design studio online, revealing that all versions of the car are eligible for a $7,500 federal tax credit in the United States.

Previously (since April 18, 2023), the Performance Only Edition was eligible for the $7,500 incentive, while other editions were eligible for half the amount – $3,750.

$7,500 federal tax credit

All new Model 3 cars qualify for a federal tax credit for eligible buyers.”

Deducting the incentive (and the mandatory destination fee, the application fee), it turns out that the entry-level rear-wheel drive (RWD) Tesla Model 3 actually starts at $34,380 (in May it was $38,130). Not bad for a car with an EPA combined range of 272 miles (438 km).

This is a very important boost to the vehicle’s competitiveness, as there are only a few BEVs that can be bought cheaper (see price comparison as of end of May 2023).

Not only that, the reintroduced Tesla Model 3 Long Range All-Wheel Drive (AWD) version, along with a $7,500 federal tax credit, is a whole lot less confusing than it was when it only qualified for $3,750, and it’s priced pretty close. From the performance version. The difference between the two is now $6,000, up from $2,250 previously.

Below, we have attached the prices of all Tesla electric cars as of June 3, 2023.

* Tesla is adding a destination fee (DST) of $1,390 and an ordering fee of $250 to all of its models (total of $1,640).

How is that possible?

The main question is how Tesla managed to qualify all versions of the Model 3 for the full $7,500 federal tax credit. As we know, the LFP (CATL) batteries obtained from China were the problem with the Model 3 RWD.

Let’s remember that federal tax credit requirements, under the Inflation Reduction Act of 2022 (IRA), in addition to North American domestic production, also include:

• 40 percent of the value of critical minerals must be extracted or processed in the United States (or FTA countries), or recycled in North America
• Fifty percent of value battery components must be manufactured or assembled in North America

Meeting just one of the requirements means eligibility for only half of the amount ($3,750). This was the case with the Tesla Model 3 RWD on April 18, 2023.

If the model now qualifies for $7,500, that means Tesla has modified its supply chain to meet both requirements.

We don’t know anything for sure, but it may have something to do with recent changes in Canada, which according to Canada’s Tesla Motorsswitched from American-made cars to Chinese-made cars (Model 3 RWD, Model 3 Long Rande, Model Y RWD, recently Model Y Long Range, Model Y Performance).

Maybe this opens up some manufacturing capacity in Fremont, California. There may also be some interesting deals with suppliers, that allow more value to be added to battery pack production in the US.