Tesla Model 3 Update: Tax Credit Shifts & Battery Innovations Ahead

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Tesla Model 3 Update
Tesla Model 3 Update

Despite a well-received refresh, Tesla’s Model 3 deliveries have fallen short of expectations in the first half of 2024. The culprit? Pricing. The base and long-range versions missed out on the federal tax credit due to their battery components, making them more expensive than the Model Y for qualified buyers.

The China-sourced lithium-iron-phosphate (LFP) cells in the base RWD and the nickel-manganese-cobalt (NMC) cells with Chinese components in the Long Range were the reason for their ineligibility under the IRA. Only the April release of the Performance trim, priced lower than the Long Range after the tax credit, offered a more affordable option.

However, Tesla has recently addressed this issue. The Long Range Model 3 is now eligible for the full $7,500 credit, hinting at a potential shift in battery suppliers. This, combined with a point-of-sale tax credit and a slight price cut, brings the refreshed Model 3 Long Range down to $39,990 for those who qualify.

Tesla Model 3 Update
Tesla Model 3 Update (Tesla)

In a bid to increase sales of the Tesla Model 3 Long Range (LR), the company has recently made a price adjustment. This move, however, puts the Model 3 Rear-Wheel Drive (RWD) at a slight disadvantage when it comes to government incentives.

The reason? The LR variant’s eligibility for the federal tax credit hinges on the use of batteries produced in North America. Tesla is working towards this goal by licensing technology from CATL, a Chinese battery giant, but this solution is still under development.

Additionally, the Model 3 Performance already utilizes Panasonic cells. By mid-2025, Panasonic’s new Kansas factory is expected to begin production of 2170 cells, eliminating Tesla’s dependence on imported LGES batteries.

Dana Phio

By Dana Phio

From the sound of engines to the spin of wheels, I love the excitement of driving. I really enjoy cars and bikes, and I'm here to share that passion. Daxstreet helps me keep going, connecting me with people who feel the same way. It's like finding friends for life.

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