Tesla’s Model 3 vehicle in California is now more affordable than a Toyota Camry, thanks to a $7,500 tax cut that the sedan qualifies for. The starting price of the all-electric vehicle is $40,240, but with the tax rebate and another California tax rebate, it can be purchased for $25,240. In comparison, the Japanese-made Camry starts at $26,320 or higher. Tesla updated its website to reflect the tax cut, and the Biden administration confirmed that all Tesla Model 3 vehicles now qualify for electric vehicle consumer tax credits. Previously, only two out of the three models were eligible for half the credits.
According to analysts in the raw materials markets for lithium-ion batteries, Tesla may have had to change its battery mineral sourcing and components to meet the subsidy requirements. There were talks between Tesla and China’s Contemporary Amperex Technology Co. Ltd. (CATL) to build a new battery plant in the US, but new regulations imposed by President Biden’s Inflation Reduction Act posed challenges. These regulations require North American assembly and new mineral requirements for EV credits, aiming to gain energy independence from China’s EV battery supply chains and promote wider adoption of EVs and plug-in hybrids in the US.
Tesla had previously used CATL’s lithium iron phosphate (LFP) battery cells for its Model 3 Rear Wheel Drive and a nickel-based cell from an unidentified supplier for its Model 3 Long Range. Analysts believe that Tesla may have switched to batteries sourced from Panasonic for their US-made Model 3 Rear Wheel Drive. It is highly likely that Panasonic is the new supplier, although concerns about cell availability for all US Model 3s remain.
Panasonic has a battery cell factory in Nevada, meeting federal requirements on local battery components. There is speculation that Tesla may be manufacturing the battery packs in the US while still using Chinese cells. However, CATL has stated that its strategic partnership with Tesla and EV consumers remains unchanged.
Out of the eligible models for tax credits, only 11 qualify for the total sum, while an additional seven entitle buyers to $3,750. Most of these models are manufactured by General Motors, Tesla, and Ford Motor Co. The tax credits do not apply to used cars or vehicles older than two years. Eligibility for the credits depends on the proportion of components sourced from North America or countries with US free-trade agreements. As a result, electric vehicles from manufacturers like Volkswagen, Hyundai, Nissan, BMW, Volvo, and Rivian Automotive do not qualify for any credits.
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